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A massive natural gas project that promised as much as $1 billion in state royalties over its lifetime is off the table for now due to a variety of factors, especially plummeting natural gas prices.
The Greater Chapita Wells project planned on 43,000 acres in the Uinta Basin was first proposed by EOG Resources in 2009 and underwent an environmental review by the Bureau of Land Management.
In mid-June, however, the company informed the BLM in a letter that its proposal is being re-evaluated due to significant changes in the natural gas market and technology advances in drilling.
“In sum, the speed of technological and engineering advances in directional and horizontal drilling, combined with significant changes in natural gas commodity prices have outpaced the viability†of the proposal, wrote Ken Boedeker, vice president and general manager of the company’s Denver division.
In June 2008, the price of natural gas spiked to $15.17 per unit, but in the midst of the BLM’s environmental review it dove to $1.72 per unit, according to Macrotrends. As of June, the price per unit was at $2.96
The project as proposed would have added to the 1,247 oil and gas wells already drilled in the area, with development of 2,808 oil and gas wells that would be drilled over 15 years. (continued on page 2)
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Over its 60-year production life, the project would have produced an estimated 4.17 trillion cubic feet of natural gas and 600 million barrels of condensate, which is used to make diesel, jet fuel and heating fuels.
In the letter, however, Boedeker noted low natural gas prices and technological advancements in horizontal drilling are causing the company to downsize the scope of the project.
“For the foreseeable future, EOG anticipates drilling significantly fewer wells per year than reflected in the revised proposed action,†Boedeker wrote.
The company is evaluating the viability of adding more horizontal wells, which would result in fewer pads and result in less surface disturbance, he noted.
That type of change alters the scope of the project and requires a withdrawal of the proposal, the company said.
Boedeker said the action should not be interpreted that the company will “eliminate†its investment in the basin, but the project will likely have to take a different form.
Rob Simmons, deputy director of the Utah Governor’s Office of Energy Development, said market conditions are tough.
“Recognizing the market challenges basin gas producers are facing, the Governor’s Office of Energy Development is leading efforts to improve market conditions, including export opportunities through strategic infrastructure investment,†he said.
The Ute Indian Tribe, which asserts authority over the project land because it is within the tribe’s historic Uncompahgre Reservation, said it was pleased with project’s withdrawal.
“Any proposal for development within the tribe’s Uintah and Ouray Reservation, including its Uncompahgre Reservation, must come before the Ute Indian Tribe’s Business Committee,†it said.
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Valaris Limited announced new contracts awarded subsequent to issuing the Company’s most recent fleet status report on February 21, 2023. Three-year contract with Petrobras for drillship VALARIS DS-8. The rig will be reactivated for this contract. The total contract value is approximately $500 million, including a $30 million mobilization fee. 100-day contract with a TotalEnergies affiliate for drillship VALARIS DS-12. The contract is expected to commence in second quarter 2023. 70-day contract with Beach Energy offshore New Zealand for heavy duty modern jackup VALARIS 107. The contract is expected to commence in third quarter 2023. The total contract value is approximately $26 million. President and Chief Executive Officer Anton Dibowitz said, “We are particularly pleased to have secured the award for preservation stacked drillship VALARIS DS-8, for a contract that is expected to generate a meaningful return over the firm contract term, and we remain focused on exercising our operational leverage in a disciplined manner. This most recent award represents the sixth contract awarded to one of our high-quality stacked floaters since mid-2021, and speaks volumes about our demonstrated track record of project execution when reactivating rigs.” Dibowitz added, “Following the reactivation of VALARIS DS-17 and DS-8, we will have ten floaters working across the golden triangle, including four drillships in Brazil, a market where we expect to see continued growth over the next several years.” Updated Guidance As a result of the contract awarded to VALARIS DS-8, which will require the rig to be reactivated from preservation stack, we are updating our first quarter 2023 and full-year 2023 guidance provided on our fourth quarter 2022 conference call on February 21, 2023. First Quarter 2023 Contract drilling expense is expected to increase by approximately $5 million to $385 million to $395 million. Adjusted EBITDA is expected to decrease by approximately $5 million to negative $5 million to breakeven. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $25 million to $30 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Full-Year 2023 Revenues are anticipated to be $1.8 billion to $1.9 billion, unchanged from the guidance provided on our fourth quarter 2022 conference call. Contract drilling expense is expected to increase by approximately $60 million to $1.49 billion to $1.59 billion. Adjusted EBITDA is expected to decrease by approximately $60 million to $180 million to $220 million. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $280 million to $320 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Capital expenditures are expected to increase by $60 million to $320 million to $360 million. Source: Valaris Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Seadrill Limited announced that the West Neptune has executed approximately six months of term extensions with LLOG Exploration Offshore, L.L.C in the US Gulf of Mexico. The extensions will commence in direct continuation of the existing term, and will keep the rig busy until Q3 2024, furthering Seadrill and LLOG’s long-term association. Total contract value for the extension is approximately $79 million. Source: Seadrill Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Semisub rig owner Dolphin Drilling has inked a new contract with Peak Petroleum in Nigeria for its 1974-built Blackford Dolphin. The firm contract, which follows the letter of award in January, gives the Euronext Growth-listed owner of three rigs the potential to extend the unit’s backlog by a minimum of 120 days and up to 485 days. The deal adds to and will be a direct continuation of the previously announced 12-month contract with General Hydrocarbon Limited (GHL). Øystein Stray Spetalen-backed company said the effective dayrate associated with the minimum firm period of the contract is $325,000, including the mobilisation fee. “The final award of the contract for Blackford Dolphin shows the opportunities in Nigeria at a strong dayrate, in addition to building on the backlog for the rig. It also underlines the attractiveness of our assets, and we look forward to returning to revenue-generating operations in 2023,” noted Bjørnar Iversen, CEO of Dolphin Drilling. Source: Dolphin Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
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