Acquiring the sweet spread of success

DELIVERING one fifth of the annual earnings of the BHP Billiton Group, BHP Billiton Petroleum (BHPBP) is off to a flying start this year thanks to its many achievements in 2011. According to the company’s latest annual report, it delivered record earnings (beforeinterest and tax) of US$6.33 billion in the 2011 fiscal year.
In addition, its acquisition of the Fayetteville Shale assets in Arkansas, US from Chesapeake Energy Corporation in February has resulted in an exceptional reserves replacement ratio of 376 per cent, with the financial year-end recording proven reserve additions of 443 million barrels of oil equivalent.
Along with Fayetteville, its acquisition of Petrohawk at the end of August has now made BHPBP a leading shale gas producer in the US. The transaction, representing a total equity value of about US$12.1 billion, provides the company with operated positions in world-class resource plays at Eagle Ford,
Haynesville and in the Permian Basin, US.
The assets cover about 1 million net acres in Texas and Louisiana. In a July announcement of its intention to acquire Petrohawk, BHP Billiton stated that the estimated 2011 net production was about 950 million cubic feet of gas equivalent per day or 158,000boe per day. At the endof 2010, Petrohawk had reported proven reserves of 3.4 trillion cubic feet of natural gas equivalent.
BHP Billiton chief executive Marius Kloppers said in the announcement that the acquisition was consistent with the company’s well defined, upstream ‘Tier 1’ strategy and provided BHP Billiton with greater exposure to the world’s energy market while broadening its geographic and customer spread.
BHPBP chief executive J Michael Yeager added that the acquisition would add high quality growth to the company. “With over a decade of significant investment and volume growth ahead,this transaction would build on our recent acquisition of the Fayetteville shale inArkansas and provides the potential to more than double our existing resource base,” Mr Yeager said.
“With the completion of this transaction, BHP Billiton Petroleum is on track to deliver compound annual growth in production volumes of 10 per cent for the remainder of the decade,” Mr Yeager said in a later statement. In its December quarterly report, the company recorded a 36 per cent increase
in petroleum production as a result of its successful Fayetteville and Petrohawk acquisitions, in addition to strong uptime performance from BHPBP’s existing, operated assets around the world. The company was the first to drill and bring production back online in the Gulf of Mexico following the Deepwater Horizon incident in 2010. It also achieved exploration and production success there late last year, with hydrocarbons being encountered in the Mad Dog field.
In Australia, first production from the North West Shelf CWLH (comprising the Cossack, Wanaea, Lambert and Hermes fields) Life Extension project was achieved on September 24, and BHPBP is on track to bring the Macedon gas development project online next year.
Following the final investment decision (FID) in September 2010, work has been progressing well on the Macedon gas development project. In BHP Billiton’s December 2011 quarterly report, the company reported that the US$1.5 billion project was 45 per cent complete. Operated by BHPBP with a 71.43 per cent interest, the project aims to commercialise natural gas from the Macedon offshore gas field in the Exmouth Sub-Basin, about 100km west of Onslow, WA. Apache Northwest holds the remaining 28.57 per cent interest. The Macedon development involves four offshore production wells connected to an onshore gas treatment plant at Ashburton North (17km southwest of Onslow) via a wet gas pipeline. A sales gas pipeline will connect to the Dampier-to-Bunbury Natural Gas Pipeline for distribution in the WA domestic gas market.
The treatment plant is expected to produce 200mmcf of gas per day, with production on track to begin in the 2013 calendar year. In a statement announcing the project’s FID, Mr Yeager said that as the first development in the Ashburton North area, Macedon would make a strong contribution to the overall growth of BHPBP’s petroleum operations in WA.
“Macedon will be a valuable asset for our company and will improve the security for domestic gas supplies in both the short and medium term for Western Australia,” he said. Technip Oceania holds the onshore engineering, procurement and construction management contract for the project. The scope of work includes design, engineering, procurement, contract management, project management, construction management and pre-commissioning services. In June 2011, a 50/50 joint venture (JV) between engineering and construction companies Clough and Streicher Group was awarded a circa $45 million contract for pipeline construction work. This included horizontal directional drilling, construction of the onshore wet gas pipeline and the sales gas pipeline, and umbilical installation. The work is anticipated for completion in May. McDermott International was awarded the subsea contract for Macedon, including structural transportation and the installation of subsea infrastructure, in July.
At the end of November, VDM Group was chosen for the design and construction of administration control and the warehouse maintenance buildings. This work is also due for completion in July.
With an estimated production life of 25 years, first production from the Pyrenees project in offshore WA had been planned for the first half of 2010. Ahead of schedule, the project produced its first oil in March of that year.

 

By Danica Newnham

2 Responses to Acquiring the sweet spread of success

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