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Oil Patch Insider Trust merger to top conventional list; Cosmo does not need jack-up
No. 2 plus No. 8 will make No. 1 in the Canadian conventional oil and gas trust world, as Penn West Energy Trust and Petrofund Energy Trust spent their Easter weekend putting the final touches on the largest conventional trust in North America.
Pending regulatory and unit holder approval, the new entity, carrying the Penn West name, will be launched in July, producing 135,000 barrels of oil equivalent per day from proved plus probable reserves of 515 million boe, with the future tied to 4.5 million acres of undeveloped land.
Volumes are 38 percent light oil and natural gas liquids, 48 percent natural gas and 14 percent heavy oil, reflecting a broadly based basket of assets, including leading edge ventures such as carbon dioxide enhanced oil recovery in Alberta and Saskatchewan; coalbed methane in Alberta; and oil sands development in the Peace River area of northwestern Alberta that is targeted to produce 20,000 barrels per day within six years.
The combined market capitalization is C$10 billion and the enterprise value is C$11.2 billion.
Penn West Chief Executive Officer Bill Andrew said developing enhanced oil recovery and oil sands holdings is important to “secure our future.”
He said there is an “ongoing effort to maintain production volumes through development and optimization.”
One of the challenges confronting the trust sector is a tight asset market, with only 35,000 boe per day up for grabs — a small fraction of offerings over recent years.
That puts added pressure on trusts to channel more of their cash flow into drilling programs, explore consolidation or look outside Canada for prospects, although Andrew said Penn West’s primary focus will remain on Western Canada.
With foreigners (the vast bulk from the U.S.) making up 52 percent of the trust’s investors, Penn West will seek a New York Stock Exchange listing.
Andrew said that for now he is confident the Canadian government has backed away from imposing limits on foreign ownership in the trust sector.
—Gary Park
Cosmopolitan in trouble? Mid-April correspondence between Escopeta Oil and ConocoPhillips Alaska suggests either the future of the Cosmopolitan oil prospect is in doubt or that ConocoPhillips and its partners Pioneer Natural Resources and Devon Energy are looking at drilling Cosmo from a platform that would later be converted for production, which is what Forest Oil did with its Cook Inlet Redoubt Shoal field. (If production rates don’t pick up at Redoubt maybe the Osprey will be for sale?)
Still, ConocoPhillips has wells that need plugging in Cook Inlet, so why would it turn down the opportunity to apply the use of its presumably already-paid-for inlet seismic data towards the cost of using the Tellus jack-up rig Escopeta and its partner Centurion Gold are bringing to the inlet later this summer?
That’s what Escopeta offered. The April 13 response from a ConocoPhillips senior landman said, “CPAI does not have any existing exploration plans in Cook Inlet that would necessitate the use of a jack-up rig.” (The landman did allow “any future requirements would necessitate a separate negotiation.”)
With all the hullabaloo over the need for a jack-up rig in Cook Inlet to drill new wells and plug old ones, the interest in using it has been surprisingly low, Escopeta President Danny Davis said April 19.
However, a second oil company has approached the Houston independent’s general contractor ASRC Energy Services about utilizing the Tellus. Davis said he was asked not to name the company at this time.
The first company to express interest was another small Texas independent, Midland-based Rutter and Wilbanks, which owns the Cook Inlet Northern Lights prospect (former names were Tyonek Deep and Sunfish).
Note: Scott Sheffield, the top executive at Dallas-based Pioneer natural Resources, parent to the Alaska subsidiary headed by Ken Sheffield, said in January that the Cosmopolitan partners shot 3-D seismic over Cosmo last summer and that Pioneer intended to make a decision “early this summer about picking up another 40 percent interest and taking over operations” from ConocoPhillips.
—Kay Cashman
More on Colville…. An April Fool’s joke it was not. Or so said Jeff and Teena Helmericks in their April 1 letter to Colville employees letting them know that they had sold their shares in the Colville group of companies to Jeff’s brother Mark Helmericks. Petroleum News wrote about the exchange in last week’s edition of Oil Patch Insider, but we got a date wrong. Mark Helmericks took over the Colville group of companies on March 31, not May 31.
We said Colville’s Palmer operations would no longer be part of the Colville group. Jeff and Teena said they “retained full ownership of all of Colville’s Palmer assets, so these will no longer belong to Colville Inc.”
Just what Jeff and Teena are going to do with the Palmer store has not yet been announced.
In an e-mail to Petroleum News, Mark said effective March 31, Colville is moving its “administrative functions back to Prudhoe Bay. Besides improving customer service, this move reflects a core commitment to our status as a locally owned and operated North Slope business.”
The Colville group of companies includes Colville Inc., a bulk and retail fuel supplier; Brooks Range Supply, a major industrial hardware supply store on the North Slope; Colville Solid Waste Services, a certificated utility for recycling and waste management; and the Prudhoe Bay General Store.
Mark was president of Colville from 1982-2002. He is returning to the company after a three-year stint in Washington, D.C.
Note: Word on the street is Smokey Norton resigned from Colville Inc. April
19 to take a position with Petro-Marine in Anchorage as director of marketing.
—Kay Cashman
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