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Wednesday, September 29, 2010

Daily Energy Digest - 9/29/2010

EQT Corporation (EQT) today announced the results of two recent Marcellus shale wells. In Greene County, PA, EQT reported an average 30-day production rate of 22 MMcfe per day from the Cooper 590384 well. The well has a total lateral length of 9,000 feet, with 8,411 feet of stimulated pay, and was completed using a 28-stage frac. The direct well cost was approximately $7.1 million, with a preliminary estimated ultimate recovery of 18 Bcf. As noted on EQT's most recent conference call, this well was in process of being completed in late July.

EQT also announced today, the successful results of the Rosborough 590259 well in Armstrong County, PA. This well reported a 24-hour IP of 15 MMcfe from 4,060 feet of stimulated pay. "These exceptional wells are the direct result of our culture of innovation at EQT," commented Steven Schlotterbeck, President, EQT Exploration & Production. "The success of the Greene County extended lateral well is an important step in our effort to decrease the development cost per Mcfe. In addition to extending the lateral, we are experimenting with closer spacing intervals than our current 1,000 foot lateral spacing design inGreene County.

"The results in Armstrong County, where EQT holds nearly 34,000 acres, are especially encouraging as this well employed a new completion design resulting in initial flow rates significantly better than nearby wells completed conventionally. The success of these two experimental wells is a testament to the quality of our acreage position and to the outstanding capabilities of the technical and operating teams at EQT," said Schlotterbeck.

EQT holds a 100% working interest and an 87.5% net revenue interest in both wells.

Whiting (WLL) success confirmed at Lewis & Clark. Last night Whiting reported two successful well results at its Lewis & Clark area targeting the Three Forks formation. The Kubas and Froelich wells came in strong at ~2,000 and ~2,100 boe/d, respectively, and were both located 32 miles away from the discovery well in Stark County, North Dakota. The wells expand Whiting's ~225,000 net acres to the south and to the east. The company moved a fourth rig to the play earlier in the month (before announcing well results) and is now planning to have five rigs drilling by mid-November.

Anadarko (APC) Last night it was announced that Anadarko had confirmed the presence of oil in its Block BM-C-29 offshore Brazil, according to a PR Newswire report. Anadarko filed the notice of presence of hydrocarbons for its Itauna drilling prospect, which had a proposed depth of 18,000' and was drilled by the Scorpion Mischief jackup drilling rig. Anadarko operates the block with a 50% working interest; Ecopetrol owns the other half. Moving north, Anadarko is set to drill an appraisal well at nearby Itaipu (Block BM-C-32, 33% working interest) during 3Q10 to test a down-dip area. Bottom line: Obviously a great sign that oil is present; the next step is to define the resource potential and potentially declare commerciality.

Newpark (NR) announces terms of its 4.0% convertible debt. Last night, Newpark Resources announced the terms of its convertible debt. The company priced an offering of $150 million aggregate senior notes that will pay a 4.0% coupon and be convertible at $11.00/share, or a 36% premium to yesterday's closing price of $8.09. The notes will come due in 2017 and the proceeds will be used to pay off the existing outstanding debt of ~$104 million from the company's term loan and revolver. All in, the terms of the issue appear to be pretty favorable for Newpark, and it will replace the higher interest rate debt (5.31% as of June 30). Additionally, the issue will have zero covenants, which is a big bonus as the company had to deal with covenant renegotiations last year.

Targa Resources Partners L.P. (NGLS) closes acquisition of ~77% interest in VESCO. VESCO, also known as Venice Energy Services Company, was a joint venture operated by Targa Resources Partner's indirect parent company, Targa Resources, Inc. As detailed in our 9/16/2010 comment, "NGLS: Acquires Final Drop Down from Parent; Raising Distribution Estimates," VESCO consists of a cryogenic natural gas processing plant in Plaquemines Parish, Louisiana, and a related gathering system with ~160 miles of pipeline which capture volumes from the Gulf of Mexico. The $175.6 million transaction was funded using the partnership's revolving credit facility. Targa's management intends to recommend a $0.01/unit increase in the partnership's quarterly distribution beginning with the 3Q10 distribution to be paid in November 2010.

BP plc (BP) Dudley announces new safety unit, but will it be substantive or just window-dressing? Incoming CEO Bob Dudley is wasting no time in highlighting safety as a priority as he leads efforts to rebuild BP's reputation following the Macondo spill. The company has announced a new Safety and Operational Risk division with wide-reaching power to oversee safety throughout the organization. The new division, which will report directly to Dudley, will be headed by Mark Bly, current head of safety and operations. BP is also reorganizing its upstream business into three distinct units - Exploration, Development, and Production. Andy Inglis, head of upstream (and previously seen as a potential CEO candidate) will be leaving BP, showing that Tony Hayward is not the only management scalp claimed by the oil spill. While we like the idea of the new safety division, we have to wonder how much real influence it will have. Will it end up as Hayward's post-Texas City attempts to build a safety culture - mere window-dressing? The jury is still out on this one.

Broadwind Energy (BWEN) shares jump on takeover rumors. GE, the world's second-largest maker of wind turbines, yesterday announced a joint venture with Hong Kong-listed Harbin Power Equipment to manufacture and supply turbines for near-shore and offshore applications in China. Subsequently, unconfirmed rumors that GE may launch an acquisition bid for Broadwind sent BWEN shares up 27%. Broadwind is North America's largest wind gear manufacturer and third-largest wind tower manufacturer, and GE is one of its top customers. Insofar as GE seems to be expanding its footprint in the wind market, an acquisition of Broadwind could make strategic sense, though whether GE would realistically pursue such a rounding-error transaction (for a company of its size) is arguable.

Amyris, Inc. (AMRS) gains on first day of trading. Having priced its IPO at $16 (below the indicated range of $18 to $20) on Monday, yesterday Amyris gained 3% -- a healthy, if somewhat uninspiring, first-day performance from this closely-watched biofuel IPO. The IPO (originally filed in April) raised $85 million. Amyris uses an industrial synthetic biology platform to produce renewable specialty chemicals and, longer term, biofuels. The company is initially focusing on Brazilian sugarcane as the primary feedstock and is partnering with existing sugar and ethanol mills in the country to establish production, thereby lowering capital costs vs. greenfield projects. Another aspect of the company's business model is its ownership of a conventional ethanol distribution business as a stepping stone into biofuels. In June 2010, the French supermajor Total (TOT) purchased a 17% equity stake in Amyris as part of a strategic partnership. Amyris' other industry partners include Cosan (CZZ) and Group SaƵ Martinho, two of the leading sugar and ethanol producers in Brazil.

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