Apache (APA) Closing on Mariner (ME) Acquisition. Last Friday, Mariner announced that it would be holding a special shareholder meeting on November 10, 2010, to approve its merger agreement with Apache. Initially announced on April 15 and expected to close around mid-3Q10, Mariner production will now contribute only roughly half of a quarter of production for 4Q10. Stockholders of record as of October 12 will be entitled to the meeting and vote.
Patterson (PTEN) Reports September Activity and Closes Pressure Pumping Deal. Patterson reported 184 rigs running in September, including 175 rigs in the United States. This is a 2% month-over-month increase from August, when the rig count was 180 rigs and 171 rigs, respectively. Patterson also closed its acquisition of Key Energy's (KEG/$9.74/Market Perform) pressure pumping division. Bottom line: Patterson averaged 178 rigs in 3Q10, in the middle of the company's 175-180 rig guidance. Given recent wet weather, we'll be interested to see if management expects to still see a seasonal ramp in activity.
Berry (BRY) Signs Solid Cali Sales Agreement. On Friday, Berry announced that it had signed a crude oil purchase agreement with Exxon Mobil (XOM) for the sale of up to 12,000 bbls/d. The agreement covers all oil production from South Midway Sunset Field (currently ~7,500 Boe/d) and extends through November 30, 2011. While the sales agreement covers ~150% of current production from the field, the extra cushion would allow Berry to ramp production from South Midway Sunset field, which is currently projected to decline slightly to ~7,000 Boe/d by 2013. Bottom line: While the DOGGR decision to award permits for the next phase of diatomite production, the sales agreement provides Berry an additional source of capital expansion (in addition to the Wolfberry) should there be further delays in securing permits for the remainder of its diatomite development.
Global (GLBL) Announces Contract Award in Dubai. This morning, Global announced it has been awarded a contract from Dubai Petroleum Establishment to design, construct, and install a platform and pipelines to connect to an offshore processing facility. Global anticipates that it will use its newly built Global 1200 as the primary construction vessel for the job, which is expected to be completed in 1H11. Although this announcement comes as good news, the award will likely be at a slim margins given it will be the initial test of Global's new state-of-the-art vessel. Once fully tested, it is expect that the 1200 will be a flagship vessel for the company. Recall that the company has a second, sister ship under construction (the Global 1201), which is expected to be delivered mid-next year.
Eagle Rock (EROC) Opens Up Its Checkbook for Panhandle Gathering System and Working Interest in Big Escambia Creek Field. Eagle Rock announced that it has acquired over 200 miles of gas gathering systems, compression, and dehydration facilities located in Wheeler and Hemphill Counties from Centerpoint Energy Field Services for $27.5 million. These assets are expected to complement Eagle Rock's gas processing facilities in the area. The partnership stated that the purchase price multiple is 7.6x the projected 2011 EBITDA forecast. Eagle Rock also announced it acquired 410.5 MBoe of proved reserves (87% proved develop producing and 130 Boe/d of production) of additional working interests in its Big Escambia Creek field for $4.2 million. Both transactions are expected to be closed no later than the middle of this month.
Kinder Morgan Energy Partners (KMP) Sells 50% Interest in Cypress Pipeline. Kinder Morgan announced that it has entered into an agreement with Westlake Chemical Corporation (WLK) to sell a 50% equity interest in its Cypress Interstate Pipeline for an undisclosed price. Recall, the 104-mile pipeline supplies Westlake's Lake Charles, Louisiana, petrochemical complex with natural gas liquids used to produce ethylene and ethylene derivatives. After the sale, Kinder Morgan will continue to operate the pipeline under a long-term agreement with Westlake Chemical.
Iraq Boosts Oil Reserve Estimate 24%, Bypasses Iran to Become World #4. The Iraqi government increased its petroleum reserve estimate to 143 billion Bbls today, a 24% jump from its most recent estimate in 2001, putting it behind only Saudi Arabia, Canada, and Venezuela. While Iraq hasn't had an OPEC output quota since the 1991 Gulf War, speculation is that future quota concerns may have been the impetus for the revision. Additionally, the augmented reserves could theoretically make the country more attractive to foreign operators. The government is counting on foreign investment to raise its production from ~2.4 MMbpd currently to a targeted ~12 MMbpd in the next six years. As a practical matter, however, the announcement may well be a fantasy; OPEC members have historically been notorious for playing politics with reserve estimates in order to "game" the quota system.
RIG COUNT The Baker Hughes (BHI) Domestic Rig Count Is Up 9 Rigs From Last Week to 1,659. The rig count is now up 62% y/y. Overall, we are 89% (783 rigs) above the rig count bottom experienced on June 12, 2009, but still 22% (372 rigs) below the peak experienced on September 12, 2008. The natural gas rig count was down 5 to 962, the oil rig count was up 14 to 687, and the miscellaneous rig count flat at 10. The horizontal rig count is at 55% of the total rig count. Bottom line: We anticipate that the gas rig count will continue to fall as producers slow drilling activity due to low gas prices. Additionally, it is believed that the ~960 gas rigs currently drilling are more than sufficient to increase domestic natural gas supply.