Providing coverage of Alaska, Canada and the Continental U.S ...International count On June 5 Baker...
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l F I N A N C E & E C O N O M Y
l E X P L O R A T I O N & P R O D U C T I O N
l G O V E R N M E N T
Vol. 25, No. 24 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of June 14, 2020 • $2.50
see FURIE BANKRUPTCY page 10
see INSIDER page 11
see CO2 PIPELINE page 10
see ECONOMIC TRENDS page 8
EIA: Market balancing sooner; US production decline to continue
Conoco nets zero workplace C19 cases; Hilcorp revenue hits $3.99B
IN A JULY 9 CERA WEEK INTERVIEW
with Daniel Yergin, ConocoPhillips
Chairman and CEO Ryan Lance said the
company has had only 13 cases of COVID-
19 reported from its operations worldwide,
none of which were traced back to the work-
place.
Lance told Yergin, vice chairman of IHS
Markit, that having an office in China helped
the company get a “jumpstart” on establishing protocols.
“In China we have a large operation in Bohai Bay that is
offshore. In working with our partner, CNOOC, (we) came
up with a protocol that said there was about a 14-day incuba-
Furie files a 3rd plan of reorg. Escopeta withdraws rival offer
Chapter 11 debtor Furie Operating Alaska LLC and related
debtor companies, Cornucopia Oil & Gas Company LLC and
Corsair Oil & Gas LLC, filed a third amended plan of reorgan-
ization June 7 in the U.S. Bankruptcy Court for the District of
Delaware.
The plan sets forth the proposed acquisition of the assets
and existing equity interests of the debtors assets by
Anchorage based HEX Cook Inlet LLC, which is scheduled to
close at the end of June.
The second amended plan was revised to address concerns
raised by the U.S. Trustee, according to a declaration in sup-
port of confirmation of the third amended joint plan filed June
8 by Scott M. Pinsonnault of Ankura Consulting Group LLC,
Alberta leads the way, launches CO2 pipeline after 11 year delay
The Alberta Carbon Trunk Line, rated as a world-leading
carbon capture project, is now fully operational after taking 11
years to negotiate a forest of regulatory reviews, soaring costs
and a shuffling of investment partners.
First announced in 2009 when the Alberta government
pumped C$495 million into the project and the Canadian gov-
ernment contributed C$63.2 million, the ACTL went through
a series of stops and starts that included the oil price crash of
2014 and changes of government.
In the end, a consortium of companies was formed to own
and operate the C$1.2 billion facility under Calgary-based
Wolf Midstream.
Article compares impact of COVID with historic ups, downs for O&G
The current disruption to Alaska’s oil industry is not the
first, but because of the pandemic, previous downturns don’t
necessarily show how industry will weather this one, Alaska
Department of Labor and Workforce Development econo-
mists Neal Fried and Sara Teel said in an article in the June
issue of “Alaska Economic Trends.”
There have been five previous downturns, “nearly all due
to falling oil prices,” the authors said, with the most recent
ending just last year and the other four between 1989 and
2003.
Some of the downturns, such as that from 1985-87 and that
from 2001-02, “were shallow and short-lived … and others
Surge subsiding? Some say all not rosy in the oil price recovery, but positive signals remain
By KAY CASHMAN Petroleum News
After nosediving into the negative in April, oil
prices bounced back in May, increasing to
$42.46 for Alaska North Slope crude, or ANS, on
June 10 in what appears to be a V-shaped recovery.
The reasons for this swift reversal include
declining unemployment filings and U.S. employ-
ers adding 2.5 million jobs in May, an indication
that the economy is quickly recovering from the
COVID-19 lockdowns, boosting demand for oil.
Another contributing factor has been oil pro-
ducers drastically reducing spending to survive the
collapse in demand and prices, with speculation
that those spending cuts might lead to an undersup-
ply of oil later this year and much higher prices —
one prediction of $70 a barrel for West Texas
Intermediate crude in a story touted for several
days on Oil Price.com.
More than expected production cuts from U.S.
oil companies also buoyed prices.
OPEC+ agreeing to continue production cuts in
July and planning to review cuts monthly, was
another piece of positive news that kept prices
moving in an upward trajectory.
Exploration’s last hope ConocoPhillips restoring production, only possible 2021 North Slope explorer
By KAY CASHMAN Petroleum News
The upcoming winter of 2021 on
Alaska’s North Slope could be the
first exploration season since 1973 with
no new wells drilled. The only company
that is possibly prepared to drill during
the off-road season — meaning it has rigs
under contract, available camps, easy
access to funding, and the necessary per-
mits — is ConocoPhillips. The company drilled
three of its planned six to seven exploration wells
last winter before it cut the season short because of
concerns about COVID-19.
As first reported by Petroleum News’ bulletin
service, in July ConocoPhillips is restor-
ing the North Slope oil production it cur-
tailed in June (approximately 100,000
barrels a day), but the company has no
plans through the end of 2020 to restart
development drilling in its Alaska oil
fields or initiate exploration drilling.
(Exploration drilling activities, such as
building ice roads, often begin in
December.)
When asked whether ConocoPhillips
will restart development drilling and drill explo-
ration wells this coming winter on the North Slope,
John Roper, director of media relations and crisis
communications for ConocoPhillips out of
Milestone or tombstone? Tentative aboriginal deal could deepen rift between elected, unelected leaders
By GARY PARK For Petroleum News
Emerging from behind a screen created by
COVID-19, the Canadian and British
Columbia governments and a handful of hereditary
indigenous leaders in northwestern B.C.
announced a historic deal that could determine the
future of land rights and resource development in a
region covering 8,500 square miles and possibly
across Canada.
The end result is likely to be either a milestone
signaling a new era in relations between First
Nations people and the rest of Canada, or a tomb-
stone to those hopes.
What the impact will be on TC Energy’s
Coastal GasLink pipeline to support the LNG
Canada project remains uncertain.
For now, the memorandum of understanding
deal has been returned to negotiators who have
been given a 12-month deadline to develop a final
pact that would make the Wet’suwet’en Nations
see PRICE RECOVERY page 7
see CONOCO PRODUCTION page 9
see ABORIGINAL DEAL page 7
RYAN LANCE
While their often-conflicting roles are hazy and debatable, the hereditary chiefs
are supposed to look after the Wet’suwet’en land, leaving the elected councils to, in the words of one source,
“look after everything under the sun with very few resources to do it.”
2 PETROLEUM NEWS • WEEK OF JUNE 14, 2020
Petroleum News Alaska’s source for oil and gas newscontents
Alaska’sOil and GasConsultants
GeoscienceEngineeringProject ManagementSeismic and Well Data
3601 C Street, Suite 1424Anchorage, AK 99503
(907) 272-1232(907) 272-1344
l E X P L O R A T I O N & P R O D U C T I O N
US rig count drops to 284, another new low By KRISTEN NELSON
Petroleum News
Baker Hughes’ weekly count of rotary rigs drilling in
the U.S. has dropped below 300, hitting a new low
of 284 for the week ending June 5, down 17 from the
previous week and down 691 from a year ago.
Prior to this year, the low count by the Houston oil-
field services company, which has issued the count since
1944, was 404 rigs in May 2016.
New low records have now been set for five weeks in
a row: 374 rigs on May 8 of this year, 339 rigs on May
15; 318 on May 22; 301 on May 29; and this week’s new
low of 284.
The count has been dropping steadily: down by 17,
17, 21, 35, 34, 64, 73, 62, 64, 44 and 20 rigs respectively,
a total of 451, over the previous 11 weeks.
The company said 206 rigs targeted oil, down 16 from
the previous week and down 583 from a year ago, while
76 targeted gas, down one from the previous week and
down 110 from a year ago. There were two miscella-
neous rigs active, unchanged from the previous week
and up by two from a year ago.
Twenty-four of the holes were directional, 253 were
horizontal and seven were vertical.
Alaska count unchanged Rig counts were unchanged from the previous week
for Alaska (3), California (4), Colorado (6), North
Dakota (12), Ohio (9), Pennsylvania (20) and West
Virginia (8).
The rig count in Texas, which at 115 has the most
active rigs in the country, was down by 12 from the pre-
vious week and down by 358 from a year ago.
New Mexico (58) was down by three rigs from the
previous week.
Louisiana (34), Oklahoma (11) and Wyoming (1)
were each down by one rig.
Baker Hughes shows Alaska with three active rigs for
the week ending June 5, down by three from a year ago.
The largest rig count drop by basin was in the Eagle
Ford (13), which was down by nine rigs. The Permian,
which has the most active rigs at 141, was down seven
from the previous week and down 305 from a year ago.
Baker Hughes has issued weekly rig counts for the
U.S. and Canada since 1944 and began issuing interna-
tional rig counts in 1975.
The U.S. rig count peaked at 4,530 in 1981. This
week’s count of 301 is a new low, surpassing lows set in
the previous three weeks. Prior to that the previous low
was 404 rigs in May 2016.
International count On June 5 Baker Hughes released its international rig
count. The count, excluding North America, was 805 for
May, down 110 from 915 in April, and down 321 from
1,126 in May 2019.
The international offshore rig count (a portion of the
international count) for May was 195, down 33 from 228
in April and down 45 from 240 in May 2019.
Baker Hughes said the U.S. rig count averaged 348 in
May, down 218 from 566 in April and down 635 from 986
in May 2019.
The worldwide rig count for May — international and
North America combined — was 1,176, down 338 from
see RIG COUNT page 4
Surge subsiding? Some say all not rosy in price recovery, but positive signals remain
Exploration’s last hope Conoco restoring production, only possible 2021 ANS explorer
Milestone or tombstone? Aboriginal deal could deepen rift with elected, unelected leaders
ON THE COVER
Oil Patch Insider: Conoco nets zero workplace C19 cases; Hilcorp revenue hits $3.99B
Furie files a 3rd plan of reorg. Escopeta withdraws rival offerArticle compares impact of COVID with historic ups, downs for O&GAlberta leads the way, launches CO2 pipeline after 11 year delay
EXPLORATION & PRODUCTION2 US rig count drops to 284, another new low
4 State OKs 2 production suspensions
5 BP to cut 10,000 jobs amid virus pandemic
5 DNR grants O&G lease rent extensions
6 OPEC Plus 10M barrel cut extended a month
FINANCE & ECONOMY3 EIA: Crude market balancing more quickly
Agency says US crude output averaged 11.4M bpd in May, down from record 12.9M bpd in November; continued decline expected
4 Prudhoe Bay gas treatment facility proposed
Tulsa-based SES Midstream LLC files for Corps permit to build CNG and sales quality natural gas plant near Deadhorse airport
LAND & LEASING
NATURAL GAS
To advertise in Petroleum News, contact Susan Crane
at 907.770.5592petroleumnews.com
PETROLEUM NEWS • WEEK OF JUNE 14, 2020 3
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By KRISTEN NELSON Petroleum News
I n its monthly Short-Term Energy
Outlook, released June 9, the U.S.
Energy Information Administration said it
now believes that the crude oil market is
balancing more quickly than it thought just
a month ago, but also cautions that while
revisions to its June forecast are generally
smaller than in recent months, the forecast
“remains subject to heightened levels of
uncertainty because mitigation and
reopening efforts related to the 2019 novel
coronavirus disease
(COVID-19) contin-
ue to evolve.”
“Initial data show
the global oil market
rebalancing faster
than EIA previously
forecast,” said EIA
Administrator Dr.
Linda Capuano. She
said global invento-
ries, which increased at 9.4 million bar-
rels per day in the first five months of the
year, left inventories 1.4 billion barrels
higher at the end of May. “However, we
expect inventories to begin drawing in
June as a result of sharper declines in
global oil production during June and
greater global oil demand than previously
expected,” Capuano said.
EIA said Brent crude oil spot prices
averaged $29 per barrel in May, up $11
from April, and are expected to average
$37 per barrel during the second half of
2020.
“EIA’s June outlook revises the fore-
cast for Brent spot prices up to $38 per
barrel in 2020,” Capuano said. “The
change is largely due to higher than
expected crude oil prices in May, driven
by a combination of additional OPEC+
production cuts, declining U.S. produc-
tion, and rising demand related to reduc-
tions in COVID-19 stay-at-home orders.
EIA expects prices to average $48 per
barrel in 2021,” she said.
EIA said high inventory levels and
spare crude oil production capacity are
expected to limit upward price pressures
over the next few months, “but as inven-
tories decline into 2021, those upward
price pressures will increase.”
US crude EIA said U.S. liquid fuels consump-
tion is expected to average 15.7 million
barrels per day in the second quarter,
down 4.6 million bpd, 23%, from the
same period last year, with the decline
reflecting “travel restrictions and reduced
economic activity related to COVID-19
mitigation efforts.”
The agency said it believes “the largest
declines in U.S. oil consumption have
already occurred” and expects demand to
rise over the next 18 months.
U.S. crude oil production is estimated
to have fallen from a record 12.9 million
bpd in November to 11.4 million bpd in
May.
“EIA expects a continued decline in
U.S. crude oil production,” Capuano said.
“Active drilling rigs fell to their lowest
level on record in May, offsetting the
effect of higher forecast oil prices.”
She said EIA is projecting a continued
decline in U.S. oil production through
March 2021, “reaching 10.6 million bar-
rels per day before increasing slightly
through the end of 2021.”
That 10.6 million bpd level would
reflect a decline of 2.2 million bpd from a
November 2019 peak.
The agency said a 2020 production
decline for the U.S. would be the first
annual U.S. decline since 2016.
While there is typically a six-month
lag in the impact of price changes on pro-
duction, EIA said “current market condi-
tions have shortened this lag as many pro-
ducers have already curtailed production
and reduced capital spending and drilling
in response to lower prices.”
Domestic natural gas The Henry Hub natural gas spot price
averaged $1.75 per million British ther-
mal units in May, EIA said, and it is fore-
casting “that relatively low natural gas
demand will keep spot prices lower than
$2/MMBtu through August.” Prices are
expected to rise through the end of 2021,
with a price rise this fall and winter from
an average of $2.05 per million Btu in
September to $3.08 in January, with spot
prices expected to average $2.04 per mil-
lion Btu this year and $3.08 in 2021.
U.S. dry natural gas production was at
record levels in 2019, but EIA said it
expects a decline in production from
those levels, from an average 92.8 billion
cubic feet per day in 2019 to an average
of 89.7 bcf per day this year.
Natural gas production will decline the
most in the Appalachian and Permian
regions, with low natural gas prices dis-
couraging gas drilling in Appalachia and
low crude prices discouraging oil drilling
with associated natural gas production in
the Permian.
EIA is forecasting U.S. liquefied natu-
ral gas exports averaging 5.6 bcf per day
in the second quarter and 3.7 bcf per day
in the third quarter, with U.S. LNG
exports expected to “decline through the
end of the summer as a result of reduced
global demand for natural gas.”
Global oil stocks EIA said global oil production has been
declining as a result of production cuts
from members of the Organization of the
Petroleum Exporting Countries and their
partners, and from declines in tight oil
production in the United States. From
April to May, EIA said, it estimates that of
a 4.5 million bpd decline in non-OPEC
liquids production, 1 million bpd was
from the U.S.
The use of floating storage has also been
declining, EIA said, from an estimated 181
million barrels mid-May, to 164 million
barrels on May 29. EIA said the increase in
the use of expensive floating storage is esti-
mated to have peaked in April at 21.5 mil-
lion bpd.
The rapid declines in U.S. crude pro-
duction could be contributing to a narrow-
ing of the spread between Brent and West
Texas Intermediate futures, which, the
agency said, “generally reflects the cost of
exporting U.S. crude oil to Asia relative to
the cost of exporting North Sea crude oil to
Asia.”
The agency said the rapid decline in
U.S. crude production “is reducing the sup-
ply of exportable crude oil and could be
increasing the relative value of U.S. crude
oil compared to other waterborne crude
oils such as Brent, particularly now that
European and Asian refiners have begun
increasing crude oil runs.” North Sea crude
“is generally less price responsive than
onshore U.S. crude oil production, keeping
Brent-linked crude oil production compar-
atively elevated,” EIA said. l
l F I N A N C E & E C O N O M Y
EIA: Crude market balancing more quickly Agency says US crude output averaged 11.4M bpd in May, down from record 12.9M bpd in November; continued decline expected
The agency said it believes “the largest declines in U.S. oil consumption have already
occurred” and expects demand to rise over the next 18 months.
LINDA CAPUANO
SECURITY SERVICEandACILITY MTED F
aNTEGRAI
SSSSS
aaaIIIISSetting the Standard for
S
MANAGEMENTr
DENALIUNIVERSAL.COMMCOMAL.COMERSAL.COMNIVERSAL.CLIUNIVERSANALIUNIVEDENALIUNDENALDEN
U.S. crude oil production is estimated to have fallen from a
record 12.9 million bpd in November to 11.4 million bpd in May.
4 PETROLEUM NEWS • WEEK OF JUNE 14, 2020
ADDRESS P.O. Box 231647 Anchorage, AK 99523-1647 NEWS 907.522.9469 [email protected] CIRCULATION 907.522.9469 [email protected] ADVERTISING Susan Crane • 907.770.5592 [email protected]
OWNER: Petroleum Newspapers of Alaska LLC (PNA) Petroleum News (ISSN 1544-3612) • Vol. 25, No. 24 • Week of June 14, 2020
Published weekly. Address: 5441 Old Seward, #3, Anchorage, AK 99518 (Please mail ALL correspondence to:
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Petroleum News and its supplement, Petroleum Directory, are owned by Petroleum Newspapers of Alaska LLC. The newspaper is published weekly. Several of the individuals
listed above work for independent companies that contract services to Petroleum Newspapers of Alaska
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1,514 in April and down 1,006 from
2,182 in May 2019.
The drop in the North America rig
count for May was 228, compared to the
drop of 110 rigs in the international
count, and accounted for 67% of the total
worldwide drop of 338. North American
rigs active in May accounted for 32% of
active rigs worldwide. l
continued from page 2
RIG COUNT
EXPLORATION & PRODUCTIONState OKs 2 production suspensions
The Alaska Department of Natural Resources’ Division of Oil and Gas has
approved two production suspensions requested by Cook Inlet Energy, a Glacier
Oil & Gas Corp. company.
The suspensions are both in Cook Inlet: the Redoubt unit and the West
McArthur River unit, with the Sword participating area included as part of the
West McArthur River approval.
In requesting the suspensions CIE-Glacier cited global low prices combined
with a lack of demand (see story in June 7 issue of Petroleum News).
The division said CIE-Glacier has committed to keeping the facilities appro-
priately staffed and under continuous monitoring. “All oil producing wells will be
shut-in, and all pipelines and flowlines will be purged, cleaned, and protected
from freeze and corrosion.” In addition, vessels and tanks used in processing will
be emptied and protected.
In the case of Redoubt, which produces from the Osprey platform and uses the
onshore Kustatan production facility, those “will be maintained in ‘warm-stand-
by’ status,” the division said.
The division said due to current market conditions, both globally and locally,
oil and gas would be produced from the units “at marginal or loss-generating
terms, and at significantly reduced royalty value for both the State and private
mineral owners.” The plans in the request for suspension would “protect the pub-
lic interest and CIE-Glacier by conserving the hydrocarbons until more favorable
market conditions persist.”
The suspensions will run for the current terms of the unit plans of develop-
ment, through April 30, 2021, in both cases. The division said should suspension
of production be required past that date, it would require written request no later
than 45 days from the expiration of the current plan of development.
—KRISTEN NELSON
l N A T U R A L G A S
Prudhoe Bay gas treatment facility proposed
Tulsa-based SES Midstream LLC files for Corps permit to build CNG and sales quality natural gas plant near Deadhorse airport
By STEVE SUTHERLIN Petroleum News
R aymond Latchem of Tulsa-based SES
Midstream LLC is proposing to build a
natural gas treatment facility at Prudhoe Bay
on Spine Road near the Deadhorse airport to
treat and process gas into commercial grade
products such as compressed natural gas and
sales quality natural gas “on par with indus-
try standards for distribution though the local
gas utility company.”
Latchem told Petroleum News the facility
is intended to serve only the small Deadhorse
market, adding that gas produced and sold
there has contained over 12% CO2 since the
beginning of field production in 1977.
“Over time, the engines that use the fuel
gas have become more sophisticated with a
greater emphasis on emissions,” he said.
“The CO2 needs to be removed to the point
that the gas that is sold in Deadhorse to the
oilfield support contractors matches the
same quality as gas sold in Anchorage and all
over North America.”
The company plans to build the small gas
treating facility next summer.
Construction might employ 12 to15 peo-
ple over several weeks, Latchem said,
adding, “long term, it will have a total of 4
operators working normal Slope rotations.”
The plant will treat between 4 million to
8 million standard cubic feet per day of gas
produced from the Prudhoe Bay unit, he
said.
A June 10 U.S. Army Corps of Engineers
public notice said the company proposes
placement of 85,000 cubic yards of gravel
fill into 8.6 acres of wetlands, to construct a
roughly shaped 1,316 foot by 260 foot rec-
tangular pad and access driveway.
According to attached plans, the facility
will include eight buildings, ranging from 20
feet to 80 feet in height, with a combined
area of 375,100 square feet.
SES selected the site because it was adja-
cent to Spine Road and minimizes the length
of an access road, while placement of fill
would avoid streams and rivers, minimizing
impacts to high value wetlands as much as
possible while maintaining safe operations
and meeting required processing needs, the
notice said, adding that the connection to the
gas distribution system will be made with
pipe buried in the driveway connecting to the
Norgasco system that is existing and buried
in the Spine roadbed.
SES said there are no non-wetland alter-
natives to the proposed site.
The Corps said consultation with the
Alaska Heritage Resources Survey indicates
that there are no cultural resources in the per-
mit area or within the vicinity of the permit
area.
While the project area is within the
known or historic range of the polar bear,
Steller’s eider and spectacled eider, the
Corps said it has determined the described
activity may affect those species but would
not appreciably modify the polar bear habi-
tat.
No essential fish habitat species are
known to use the project area, the Corps said.
Facility lighting for operational safety
will be installed and maintained as to mini-
mize interference with the natural patterns of
local wildlife, the notice said, adding,
“shades and directed lighting will be used to
provide downward lighting.”
Comments must be received by June 25
at: Regulatory Division (1145) CEPOA-RD
Post Office Box 6898 JBER, Alaska 99506-
0898 to become part of the record and be
considered in the decision.
Comments by email can be sent to the
project manager, Mary Romero, at:
[email protected] or to reg-
All comments should include the public
notice reference number: POA-2020-
00241.00241. l
Contact Steve Sutherlin at [email protected]
PETROLEUM NEWS • WEEK OF JUNE 14, 2020 5
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l L A N D & L E A S I N G
DNR grants O&G lease rent extensions By KRISTEN NELSON
Petroleum News
T he monthly lease report for May
from the Alaska Department of
Natural Resources’ Division of Oil and
Gas contains a combination of confirma-
tions of actions taken by companies in the
past and reactions to the current COVID-
19-driven economic situation.
Working interest lease ownership
transfers between Armstrong, GMT, Oil
Search Alaska and Repsol reflect an
option which Oil Search exercised last
summer to increase its stake in Pikka and
Horseshoe leases west of the central
North Slope. Oil Search picked up the
balance of working interest ownership
held by Armstrong and GMT in the
acreage. Oil Search and Repsol also
aligned their interests across many of
their shared North Slope assets.
There are also some notification lessee
changes, from Repsol E&P USA Inc. to
Oil Search (Alaska) LLC.
Extension of rental payments In a reflection of the current economic
situation, Accumulate Energy Alaska Inc.
and Burgundy Xploration LLC requested
from DNR Commissioner Corri Feige, and
received May 4, extensions of oil and gas
lease rental payments.
The two companies, along with Premier
Oil ANS Ltd., which is included in the lease
extensions as a working interest owner, have
a swarth of leases across the bottom of North
Slope leased acreage, running from south of
Kuparuk in the west to south of Prudhoe in
the east and straddling the Dalton Highway.
The division’s summary of acreage by
lessee shows Accumulate with 245,928
acres, Burgundy with 112,325 acres and
Premier with 95,914 acres, a combined
454,167 acres.
The companies applied under state
statute, which allows the DNR commission-
er to grant an extension for payment of rental
on any mineral lease upon a finding that
compliance with the rental payment require-
ments is prevented by reason of war, riots or
acts of God.
“President Trump and Governor
Dunleavy have both declared states of emer-
gency, nationally and in the state, for the
unprecedented COVID-19 outbreak. The
social and economic restrictions of this have
placed an unanticipated burden on Alaskan
businesses that justifies an extension of time
within which to make payments,” Feige said
in granting the requests. The companies
received six-month extensions for oil and
gas lease rentals due in June, July and
September and three-month extensions for
rentals due in October and November.
Surrendered leases Also reflected in the May activity report,
Great Bear Pantheon LLC has surrendered
11 leases. Four of the leases form a block on
the west side of the North Slope south of
Nuiqsut, isolated from other Great Bear
Pantheon leases which are contiguous. The
other seven leases which the company sur-
rendered are a strip of leases on the northern
edge of the company’s southcentral North
Slope lease block, and leases adjacent to
those to the south on the western edge of the
lease block.
According to the division’s June 4 sum-
mary of acreage by lessee, that leaves the
company with some 125,000 acres of North
Slope oil and gas leases.l
alaska lease
report
l F I N A N C E & E C O N O M Y
BP to cut 10,000 jobs amid virus pandemic By DANICA KIRKA
Associated Press
O il and gas company BP announced June 8 that it
will slash its global workforce by 10,000 jobs as
the COVID-19 pandemic slams the energy industry.
Chief Executive Bernard Looney said that the cuts
will affect office-based roles in BP’s global workforce
of 70,000 people and come mostly this year. The
changes are expected to significantly affect senior lev-
els, cutting the number of group leaders by a third.
“We are spending much, much more than we make
— I am talking millions of dollars, every day,” Looney
said in an email to staff that revealed that net debt rose
by $6 billion in the first quarter. “We have to spend less
money.”
He pledged to bring down capital expenditure by
25% this year, a reduction of around $3 billion. He also
said that it costs $22 billion a year to run the company,
including $8 billion in people costs.
“So we are driving down those operating costs by
$2.5 billion in 2021 — and we will likely have to go
even further,” he said.
Company already restructuring The job cuts come at a time of tremendous change for
London-based BP. It had already embarked on a restruc-
turing plan to ensure its long-term viability as the world
decreases its reliance on fossil fuels in an effort to fight
climate change. BP wants to eliminate or offset all car-
bon emissions from its operations and the oil and gas it
sells to customers by 2050, an ambitious target.
The wider energy industry has meanwhile been hit
hard by the pandemic as the widespread limits on busi-
ness, travel and public life reduced the need for oil, gas
and other fuels.
Supply of oil and gas was particularly high when the
outbreak began, creating a perfect storm for the indus-
try. With storage facilities filling up, the U.S. price of oil
went below zero in April for the first time ever.
“To me, the broader economic picture and our own
financial position just reaffirm the need to reinvent BP,”
Looney said in the email. “While the external environ-
ment is driving us to move faster — and perhaps go
deeper at this stage than we originally intended — the
direction of travel remains the same.”
Challenges facing industry The U.S. contract for crude oil began the year at
over $60 a barrel, collapsed to below -$37 in April and
recovered to about $39 a barrel as of June 8 as OPEC
countries agreed to limit production.
David Elmes, who leads the Global Energy Research
Network at Warwick Business School, said BP’s cuts
are symptomatic of the wider challenges facing the
industry, with firms in the sector thinking about cutting
costs.
“BP and the other European-based international
companies have already said they will become less
focused on oil and gas over time,” he said. “If this sit-
uation continues, there will be intense discussions
about what can they do to move faster.”
Major companies like BP with diversified business-
es are likely to survive the pandemic, but smaller oil
producers are going to have a harder time, analysts say.
U.S. shale companies in particular took on a lot of
debt to finance operations and can only make ends meet
at about $40 a barrel. Heavily indebted companies will
have to refinance at a time of capital constraint.
Some companies are already going under. Whiting
Petroleum, a shale producer, filed for bankruptcy pro-
tection in April, for example followed by Diamond
Offshore Drilling. More are expected. l
In a reflection of the current economic situation, Accumulate
Energy Alaska Inc. and Burgundy Xploration LLC requested from
DNR Commissioner Corri Feige, and received May 4, extensions of oil and gas lease rental payments.
U.S. shale companies in particular took on a lot of debt to finance operations and can only
make ends meet at about $40 a barrel. Heavily indebted companies will have to refinance at a
time of capital constraint.
By JON GAMBRELL & FRANK BAJAK Associated Press
O PEC and allied nations agreed June
6 to extend a production cut of
nearly 10 million barrels of oil a day
through the end of July, hoping to encour-
age stability in energy markets hard hit by
the coronavirus-induced global economic
crisis.
Ministers of the cartel and outside
nations led by Russia met via video con-
ference to adopt the measure, aimed at
cutting the excess production depressing
prices as global aviation remains largely
grounded due to the pandemic. The
curbed output represents some 10% of the
world’s overall supply.
But danger still lurks for the market,
even as a number of nations ease virus-
related lockdowns, and enforcing compli-
ance remains thorny.
Algerian Oil Minister Mohamed
Arkab, the current OPEC president,
warned meeting attendees that the global
oil inventory would soar to 1.5 billion
barrels by the mid-point of this year.
“Despite the progress to date, we can-
not afford to rest on our laurels,” Arkab
said. “The challenges we face remain
daunting.”
That was a message echoed by Saudi
Oil Minister Abdulaziz bin Salman, who
acknowledged “we all have made sacri-
fices to make it where we are today.” He
said he remained shocked by the day in
April when U.S. oil futures plunged
below zero.
“There are encouraging signs we are
over the worst,” he said.
Russian Energy Minister Alexander
Novak similarly called April “the worst
month in history” for the global oil mar-
ket.
The decision came in a unanimous
vote, Energy Minister Suhail al-Mazrouei
of the United Arab Emirates wrote on
Twitter. He called it “a courageous deci-
sion.”
One-month extension But it is only a one-month extension of
a production cut that was deep enough “to
keep prices from going so low that it cre-
ates global financial risk but not enough
to make prices very high, which would be
a burden to consumers in a recessionary
time,” said Amy Myers Jaffe, senior fel-
low at the Council for Foreign Relations.
“There is so much uncertainty that I
think they took a conservative approach,”
she said. “You don’t know how much
production is going to come back on. You
don’t know what’s going to happen with
demand. You don’t know if there’s going
to be a second (pandemic) wave.”
Jaffe said improved oil demand in
China and Asia and a gradual stabiliza-
tion of demand in the United States and to
some extent Europe, where there’s some
cautious economic reopening, were
encouraging for producers.
OPEC has 13 member states and is
largely dominated by oil-rich Saudi
Arabia. The additional countries involved
in the so-called OPEC Plus accord have
been led by Russia, with Mexico under
President Andres Manuel Lopez Obrador
playing a considerable role at the last
minute in the initial agreement.
Crude oil prices have been gaining in
recent days, in part on hopes OPEC
would continue the cut. International
benchmark Brent crude traded June 6 at
over $42 a barrel. Brent had crashed
below $20 a barrel in April.
Saudis earlier flooded market Earlier this year, when demand was
down, Saudi Arabia was flooding the
market with crude oil, helping to send
prices down to record lows. That prompt-
ed the U.S. government in April to take
the unusual step of getting involved in
OPEC’s negotiations, pressuring mem-
bers of the cartel to agree to cuts to help
end the oil price free-fall.
At the time, President Donald Trump
said the U.S. would help take on some of
the cuts that Mexico was unwilling to
make. And perhaps more importantly, a
group of U.S. senators upset over the
impact on U.S. shale production said at
the time that they had drafted legislation
which would remove American forces,
including Patriot Missile batteries, from
Saudi Arabia.
Under a deal reached in April, OPEC
and allied countries were to cut nearly 10
million barrels per day until July, then 8
million barrels per day through the end of
the year, and 6 million a day for 16
months beginning in 2021.
In a rambling Rose Garden speech
June 5, Trump took credit for the April
deal. “People said that wasn’t possible
but we got Saudi Arabia, Russia and oth-
ers to cut back substantially,” he said.
“We appreciate that very much.”
U.S. Energy Secretary Dan Brouillette
tweeted his applause June 6 for the exten-
sion, which he said comes “at a pivotal
time as oil demand continues to recover
and economies reopen around the world.”
However, some countries have been
producing beyond quotas set by the deal.
One was Iraq, which remains decimated
after a years-long war against the Islamic
State group. Iraq Oil Ministry spokesman
Assem Jihad said in a statement that
Baghdad had “renewed its full commit-
ment” to the OPEC Plus deal.
One month extension expected Analysts had expected only a one-
month extension given the still fluctuat-
ing level of demand.
“If the demand is great, countries like
Russia will want to produce more oil, so
they probably won’t want to get locked
into a longer-term deal that may not help
them,” said Jacques Rousseau, managing
director at Clearview Energy Partners.
In a research note, Clearview also said
June 6 that the producers group “appears
to be going to great lengths to keep the
deal together despite unequal compli-
ance” — trying to avoid public fights on
the issue.
“That solution might work today, but
not repeatedly,” it said, citing reports of
rising Libyan output and the end of pro-
duction cuts from Mexico that will
heighten the need for compliance.
Major production cuts are simply
untenable for countries such as Iraq,
Oman and Ecuador, whose economies
depend nearly exclusively on petroleum
income, as they could face debt default. l
l F I N A N C E & E C O N O M Y
OPEC Plus 10M barrel cut extended a month
6 PETROLEUM NEWS • WEEK OF JUNE 14, 2020
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PETROLEUM NEWS • WEEK OF JUNE 14, 2020 7
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the first in Canada to be recognized as
having aboriginal title over their territory.
Behind closed doors? The two governments and eight
unelected Wet’suwet’en leaders who par-
tially control some affairs of 3,200 resi-
dents, struck the unparalleled deal while
attentions were diverted by the COVID-
19 pandemic, raising deep suspicions
about what occurred behind closed doors.
While their often-conflicting roles are
hazy and debatable, the hereditary chiefs
are supposed to look after the
Wet’suwet’en land, leaving the elected
councils to, in the words of one source,
“look after everything under the sun with
very few resources to do it.”
The MOU has been vehemently
opposed by 20 elected First Nations (four
of them in Wet’suwet’en territory) which
have signed pipeline benefits and access
deals with TC Energy.
That means one of the first matters to
be resolved is who actually speaks for the
Wet’suwet’en people going forward —
the elected or the unelected leaders —
which some believe is a recipe for disas-
ter and could require a lot of more give
and take than was necessary to arrive at
the MOU. That could easily be the stage
where the tentative pact stumbles.
Unelected chiefs shut down work Four months ago, the issue of unre-
solved land claims flared up when the
unelected chiefs succeeded in shutting
down work on the C$40 billion, Shell-led
LNG Canada project, the costliest private
sector undertaking in Canadian history.
Road and rail blockades initiated in
January halted work on the C$6.6 billion
Coastal GasLink pipeline, a 400-mile link
to deliver gas feedstock to LNG Canada’s
liquefaction facility and export terminal
at Kitimat on the northern B.C. coast.
Those protests spread rapidly across
Canada, with First Nations in Ontario and
Quebec, none of them with any direct ties
to the LNG Canada project, effectively
closing the bulk of Canada’s rail net-
works, affecting thousands of rail and
transportation jobs along with retail busi-
nesses and agriculture shipments. Some
analysts estimated the initial cost to
Canada’s national economy at C$3 billion.
Then COVID-19 slowed work on
Coastal GasLink, triggered by a B.C. gov-
ernment ban on gatherings of more than
15 people, putting an end to demonstra-
tions against the pipeline.
But that provided an opportunity for
the hereditary chiefs and the two govern-
ments to engage in secret negotiations
resulting in the MOU, a rare decision that
bypassed a costly treaty process that typi-
cally takes decades to move through vari-
ous stages including court action.
“You will be the first indigenous
nation in Canada to have recognition of
your aboriginal title over your territory,”
the hereditary chiefs boasted when they
were finally forced into the public spot-
light, claiming the tentative terms require
them to give up “absolutely nothing.”
Far from final deal However, the MOU is far from a final
deal. The parties to that pact are now
faced with a massive undertaking to settle
“areas of jurisdiction,” including “child
and family wellness, water, wildlife, fish,
land use planning, lands and resources,
revenue sharing, fair and just compensa-
tion ... and such other areas as the
Wet’suwet’en propose.”
Agreement on those issues is supposed
to happen within 12 months, although one
observer suggested “it is more likely
Donald Trump and Joe Biden will walk
together on the moon” before that dead-
line.
B.C. Premier John Horgan admitted
the consultation process has fallen short
of his expectations.
“We need to have a resolution to the
governance challenges in Wet’suwet’en
territory,” he told reporters. “I was hope-
ful that the (tribe) gathering to discuss the
MOU would have been the opportunity
for that to occur. Clearly, it hasn’t been
perfect.”
One of the elected chiefs, Dan George
of the Ts’il Kaz Koh First Nation, deliv-
ered a blunt verdict.
He said the MOU is equivalent to
“signing an agreement to buy a car and
negotiating the price later. If the (heredi-
tary chiefs) get title and rights over our
lands ... it has huge implications for my
members.” l
continued from page 1
ABORIGINAL DEAL
The reopening of global economies and expectations
of increased activities worldwide also contributed to a
fast rebound in prices.
Consumer demand in the world’s top oil importer,
China, recovering to pre-COVID-19 levels was encour-
aging as the country was the first to go into lockdown
after the virus appeared in Wuhan, and the first to exit
lockdown, setting what analysts expected to be a model
for countries subjected to the virus in later time periods.
Second wave of fear Although increases in COVID-19 cases were expected
as states came out of lockdown, there has also been very
little progress made on a vaccine for the virus. And the
fact coronavirus cases are indeed on the rise in in the
U.S., fear is growing about a second wave that could
erase some of the past month’s economic gains.
Equally important have been recent warnings by a
cross-section of Wall Street analysts that traders and
investors should be more cautious because there are indi-
cations the spike in oil prices is not supported by funda-
mentals.
Those analysts are questioning whether the increase in
demand is the result of rising consumption or simply the
result of refiners and traders stocking up on cheap crude,
OilPrice.com reported June 10: “ING’s Patterson and
Ehsan Khoman at Japanese bank MUFG say the surge in
demand could partly be the result of opportunistic buying
by refiners. Consequently, Goldman Sachs has predicted
that Brent prices will pull back to $35 per barrel in the
coming weeks from a recent high of $43.”
In a June 9 analysis Goldman Sachs’ commodities
research team led by Jeffrey Currie wrote, “Despite the
rally, we have been hesitant to recommend a long position
this early in the cycle for several reasons,” one being
there is still surplus inventory.
Their note also said, “This is not to dismiss the current
recovery or not acknowledge that it is progressing ahead
of expectations, but rather note that prices are ahead of
the rebalancing where oil still faces a billion-barrel inven-
tory overhang.”
The Goldman team described crude’s rally as “surpris-
ing given the massive inventory overhangs and depressed
demand faced by energy and agriculture markets.”
Sure enough, in early trading (6 a.m. Alaska-time) on
June 11 Brent crude, which tracks close to ANS, started
to falter, losing $2.47 and dropping to $39.26 as
Petroleum News went to press.
Alex Kimani’s takeaway “At this juncture, it’s best for investors to adopt an atti-
tude of cautious optimism. On one hand, the bulls argue
that OPEC+ has curtailed production too fast, with some
oil executives eyeing the seemingly untouchable WTI
prices of $70 in the current year,” Alex Kimani for
Oilprice.com wrote June 10.
“On the other hand, poor refining margins are telling a
different story while oil prices have, worryingly, been
strongly pulling back from recent highs on fears that
increased production by U.S. shale producers and Libya
will offset the OPEC+ cut,” Kimani continued.
“As many analysts have pointed out, the biggest wild
card in this market remains the speed at which demand is
going to bounce back in the coming months,” he said.
Ending on a positive note Kimani said, “The current
evidence though appears to lend support to the bull
camp.”
Fingers crossed. l
continued from page 1
PRICE RECOVERY“As many analysts have pointed out, the
biggest wild card in this market remains the speed at which demand is going to bounce back
in the coming months. The current evidence though appears to lend support to the bull
camp.”—Alex Kimani
8 PETROLEUM NEWS • WEEK OF JUNE 14, 2020
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were longer and deeper.”
The authors focus on the job impact since
1990.
While oil industry employment (oil pro-
ducers and oil field service companies) in
the 1990s went from 10,700 in 1991 to
7,900 in 1999, “job levels remained within a
fairly tight range,” as illustrated by a graph
accompanying the article (Trends is avail-
able on the department’s website at
https://labor.alaska.gov/trends/home.htm).
Oil employment continued to trend
down, only reversing in 2006 when industry
jobs again topped the 10,000 mark. It contin-
ued to climb, reaching 14,000 in 2013, peak-
ing at 14,800 in 2014 and remaining above
14,000 through 2015.
Oil price impact For four years, oil prices hovered around
$100 per barrel, but in 2015 they fell to half
that, remaining low for three years, with
resulting job declines of about a third, nearly
5,000, between 2015 and 2018.
“That was more than double the amount
the industry had lost at any point in history,”
the authors said.
Jobs bottomed at 9,400 in 2018, grew to
9,900 by the end of 2019 and to 10,500 by
March 2020.
The forecast had been for employment
growth to continue in 2020, “but the indus-
try took a double hit from COVID-19
restrictions and plunging oil prices in late
March, and jobs and prices began to fall in
concert,” with employment dropping to “an
estimated 8,900 in April, the lowest since
2005, and is anticipated to fall further.”
Job growth was already being restrained
by improvements in technology and produc-
tion decline, but those impacts aren’t clear,
the authors said, as production fell in 2015
and employment remained near its peak.
How do jobs relate to production? The department’s forecast for jobs for
2004-14 had projected zero job growth for
the oil industry. Production was down to half
its peak by 2006, a decline accepted as per-
manent, with employment presumed to fol-
low.
But high oil prices, new exploration and
development “and the need for more labor to
produce the same amount of oil kept indus-
try employment at much higher levels than
observers had thought possible.”
The average Alaska oil industry employ-
ee accounted for 197 barrels of oil per day in
1992, but in 2005 that number was 107 bpd
with a low of 36 bpd per worker in 2015,
“around the same time employment hit its
highest level to date,” the authors said.
Prices were driving employment, dou-
bling between 2002 and 2005 to some $53
per barrel, “allowing employment to resume
growing and hit new heights within just two
years.”
The average price of oil in 2008 was $98
a barrel; it briefly hit $144 that July.
And while prices came down during the
U.S. Great Recession, they rose above $100
a barrel in 2011 and remained that high for
four years.
“The job count followed a similar pat-
tern, surpassing 12,000 in 2008 and break-
ing new records each year before topping
out at 14,800 in 2014,” the authors said.
What’s different? “The price of oil will be the biggest vari-
able in determining the size of the state’s oil
workforce in the coming years,” the authors
said, “but COVID-19 means additional
pressures and uncertainty. Production has
never fallen so hard or so fast, and prices
have never fallen so low. The related over-
supply and how long it lasts is another con-
cern,” they said.
A barrel of Alaska North Slope crude
sold for $65 in January, by March it was
$33, by April $17, finally dropping below
$10 for four days near the end of April,
“with one day registering a negative price
— something that’s never happened
before.”
The authors said the price had moved
back into the $30s by the time their article
went to press.
The oil glut was primarily caused by the
pandemic and global shelter-in-place orders
and other restrictions which resulted in “an
unprecedented and sudden drop in demand
for crude oil worldwide, estimated at 20
million fewer barrels per day during the
early weeks.”
Saudi Arabia and Russia also fought a
price war, with the Saudis flooding the mar-
ket with crude, putting “immense pressure
on storage capacity and price.”
In response, oil producers “are taking
far-reaching measures such as curtailing
production, slashing capital budgets, and
laying off workers,” the authors said.
“With such uncertainty, Alaska’s oil and
gas employment is likely to remain at lower
levels for an extended period,” they said.
(Above abbreviated from “The oil indus-
try’s ups and downs” in the June issue of
Alaska Economic Trends.)
—KRISTEN NELSON
continued from page 1
ECONOMIC TRENDS
Alaska’s oil and gas industry accounts for nearly 20 percent of the nation’s entire domestic production. The Department of Homeland Security con-siders oil and gas among the 16 critical infrastructure industries that "have a special responsibility in these times to continue operations." While our News Bulletin service provides readers with immediate news of signifi-cance and Petroleum News offers a weekly recap, our annual The Explorers magazine provides the big picture, including future goals of the oil and gas companies with operations in Alaska. Show your continued support to Alaska’s oil and gas industry and advertise in The Explorers magazine today! Contact Susan Crane: 907-250-9769
Information has never been more important!
ExplorersThe
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Explorers
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Sea urchins to Kombucha, Brown Line carries cool freight As reported by Lynden News May
29, Brown Line’s “bread and butter” is the I-5 corridor from Washington to California. Four days a week, drivers make the trip hauling fresh and frozen fish, chicken and other refrigerated products up and down the coast.
“We also haul some lesser-known types of freight, like sea urchin and Kombucha,” explains Riley Rosvold, Brown Lines sales manager. The round, spiky creatures are harvested for the eggs inside, called roe, which is used in sushi. Brown Line is the only carrier in the Pacific Northwest trusted to carry the high-value, temperature-sensitive freight.
Divers bring the urchins to the surface during the winter months and they are delivered to Brown Line for transport to Oxnard and Los Angeles. They are then processed and the roe is flown to Japan.
“We are diversifying our freight hauls,” Riley says. “In the past, Brown Line has been reliant on the seafood industry, but now we are moving into more dairy and vegan prod-ucts.” Offering both truckload and LTL service throughout the U.S. and Western Canada, Brown Line provides companies with a variety of delivery options.
“Our freight is extremely time-sensitive due to short shelf life and expiration dates, so we have to be vigilant about traffic, deadlines and equipment,” Riley explains. “Many cus-tomers shipping fresh and chill products have sell-by dates which are less than a week after production. It is a testament to our driving teams and dispatchers that our customers trust us to deliver their products at the peak of freshness and quality — especially in the congested Los Angeles area. Routing our trucks efficiently and effectively is imperative.”
CO
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Houston, said “the capital reductions we announced in
March and April assumed we don’t resume drilling
activity at our North Slope operations for the remainder
of 2020. We haven’t yet set our capital plans for 2021.”
Those plans “will depend on our outlook for prices
and, specifically in Alaska, the outcome of the tax initia-
tive," Roper said.
This last comment came as no surprise since Scott
Jepsen, ConocoPhillips Alaska’s vice president of exter-
nal affairs and transportation, said May 8 that while the
company’s goal is to “weather the storm” and get North
Slope jobs and production back online, getting back to a
normal level of activity in Alaska is partly dependent on
the investment climate, “and by that, I mean on whether
or not the oil tax initiative passes,” noting it calls for “a
significant tax increase” which “will put a brake on
future investment.”
Above-ground risk in Alaska PN’s questions to Roper were triggered by a June 4
CERA Week interview/discussion between Daniel Yergin,
vice chairman of IHS Markit, and Ryan Lance,
ConocoPhillips chairman and CEO.
“We’ve got about a third of our production shut-in as a
company — 400,000 barrels a day. But we see some
strengthening in the market so we are in the process of think-
ing about under what circumstances should we start coming
back into the market and then start selling our product,”
Lance told Yergin.
Roper was not asked for, nor did he offer, information
about ConocoPhillips’ resumption of Lower 48 production,
where the company has been a shale producer for about 10
years.
When asked by Yergin about the new potential in Alaska,
Lance talked about the company’s big North Slope Narwhal
and Willow oil discoveries. Those “new petroleum systems”
offered Alaska the opportunity to “stabilize production
going through TAPS,” the trans-Alaska pipeline system.
“We see a lot of opportunity in Alaska, Lance said, noting
ConocoPhillips “took some of our partners out” and now
“own a 100% position.”
But if the new tax initiative passes, it increases the
“above-ground risk.” The North Slope is already a “high
cost area,” he said.
And although ConocoPhillips has operated in Alaska
for "a long time … if the tax rate goes up, cash flows go
down and we have to manage in a rational environment,”
Lance said.
ConocoPhillips’ strategy ConocoPhillips revised its corporate strategy four years
ago in 2016 after the oil price downturn that began in 2014.
“We basically said you’ve got to give a fair amount back
to the shareholder — in our case it’s greater than 30% of our
cash. … But more importantly grow our company on 70%
of the cash,” Lance said.
Growing modestly with “a real hyper-focus on cost, low
cost of supply” and generating competitive returns is critical,
he said.
“The world needs to transition to lower carbon fuels over
time. But even then, there’s space for oil and gas because it’s
so important for cheap reliable energy in all four corners of
the world,” Lance said, adding that against that backdrop,
it’s a “rational decision to say, ‘you need to keep the share-
holder.’” l
continued from page 1
CONOCO PRODUCTION
“The world needs to transition to lower carbon fuels over time. But even then, there’s space for oil and gas because it’s so important for cheap
reliable energy in all four corners of the world,” Lance said.
“We haven’t yet set our capital plans for 2021.” Those plans “will depend on our
outlook for prices and, specifically in Alaska, the outcome of the tax initiative,” Roper said.
10 PETROLEUM NEWS • WEEK OF JUNE 14, 2020
229-6000
interim COO of Furie.
The debtors had filed a second amended joint plan of
reorganization for the debtors on May 6, and a plan supple-
ment on May 29, but the trustee’s concerns sent the parties
back to the negotiating table.
Pinsonnault said extensive discussions between the
debtors and the debtors’ key stakeholders, including HEX
and the prepetition lenders, resulted in significant revisions
to the plan and concessions by all parties involved.
The plan provides that the prepetition term loan admin-
istrative agent will complete a foreclosure for the retention
and acceptance of the pledged interests — pledged equity
— in Cornucopia and Corsair by its designee, in partial sat-
isfaction of the prepetition term loan obligations, he said,
adding that the pledged equity will be canceled and extin-
guished as per the plan and the confirmation order.
New equity interests will be issued to HEX Cook Inlet,
and in exchange, HEX Cook Inlet will pay $5 million to
the debtors, which will be used to satisfy certain claims and
taxes.
The new plan will be considered by U.S. Bankruptcy
Judge Laurie Selber Silverstein in an omnibus hearing June
11.
Escopeta bows out of the race As the HEX acquisition moves closer to closing, a com-
peting offer for the Furie assets has been withdrawn.
Danny Davis told Petroleum News June 7 that his com-
pany, Houston based Escopeta KLU Operating LLC, was
dropping out of the running after a $5.5 million cash offer
the company submitted in April failed to gain traction.
“We withdrew because we couldn’t get any cooperation
out of anyone — nobody ... lenders, lawyers, no one,” he
said. “No one took us seriously; we had our funds together
and we could have closed but no one paid us any atten-
tion.”
Davis said Escopeta KLU had additional commitments
from its investors to provide an additional $3 million for
well workovers and working capital needs.
Davis is the former president of Escopeta Oil, the orig-
inal operator of the Kitchen Lights unit — which along
with an offshore natural gas production platform, pipelines
and an onshore processing plant forms the nucleus of the
Furie assets to be transferred in the sale.
For now, Davis is standing down, but he remains inter-
ested in purchasing the Furie assets and he said his group
was ready as a backup if HEX owner John Hendrix is
unable to close the transaction.
“If for some reason he defaults, or hesitates, we’re ready
to move forward,” Davis said. “We’re ready to take over.”
Releases essential to closing the deal In a memorandum filed June 8 supporting an order con-
firming the third amended plan, attorneys of the debtors
argued that releases contained in the plan were vital to the
successful reorganization of the companies.
“Each released party has made substantial contributions
to the Chapter 11 cases, including, among other things,
funding the Chapter 11 cases, which allowed for the parties
to conduct the sale process in the attempt to find a buyer,
investigate any claims belonging to the debtors, and pro-
vide for the plan process that will include the formulation
of the litigation trust, funding the prosecution of claims by
the litigation trust, negotiating and drafting the plan and
documents in the plan supplement.” the memorandum
said.
Each of the debtors’ lenders is accepting less than oth-
erwise entitled, it said.
The royalty and working owners parties have agreed to
reduce working interests in the oil and gas leases operated
by the debtors and settle litigation claims, it said.
“The contributions of the released parties were essential
to administering these Chapter 11 cases and preserving the
value for the debtors’ creditors,” it said. “The underlying
agreement would not have been reached absent such
releases.”
Without the releases, the debtors’ prepetition lenders
would not have contributed to the plan or the process of
formulating and negotiating it, the memorandum said.
“The plan contemplates the acquisition of the new equi-
ty interests of the debtors assets by HEX, or its designee,”
it said. “HEX and its designee, HEX Cook Inlet, have suf-
ficient capital to consummate the acquisition.”
The United States objects The United States, on behalf of the U.S. Bureau of
Customs and Border Protection, filed an objection June 6
to the second amended plan of reorganization.
The United States filed a general unsecured claim
against Furie, in the amount of $7,104,387.28, representing
the unpaid portion of a 2017 settlement agreement from a
lawsuit Furie brought challenging a $15 million fine levied
over a determination by customs that the company violated
the Jones Act in 2011 when it brought a jack-up rig to Cook
Inlet from Texas.
The settlement agreement was listed in a notice of
executory contracts and unexpired leases to be rejected by
the debtors filed May 15, the objection said, adding that the
United States objects to being listed in the rejection notice
because the settlement agreement is not an executory con-
tract within the meaning of the Bankruptcy Code.
The United States objected to plan provisions governing
the rejection of contracts, the objection said, adding, “The
United States reserves all of its rights of setoff, and to the
extent the United States has a right of setoff, it is entitled to
payment as a secured creditor.”
According to the memorandum in support of the third
plan of reorganization, the United State raised the only
objection to the plan.
The debtors amended the rejected contracts list to
remove the Customs settlement agreement, accordingly,
the objection to the plan’s treatment of rejected contracts
has been resolved, the memorandum said.
Other objections by Customs were resolved, the memo-
randum said, including the scope of a claims estimation
process and a reconsideration process.
That objection was also raised informally by the U.S.
Trustee and was addressed through modifications to the
definitions of contained in the plan, the memorandum said.
Objections over recoupment rights of the United States
prompted changes in the plan’s language to bring the plan’s
treatment of third party setoff and recoupment rights in line
with applicable Third Circuit law, the memorandum said.
“As such, the debtors believe that the CBP’s objection
to the plan’s treatment of setoff and recoupment rights has
been resolved,” the memorandum said.
The debtors made modifications or otherwise addressed
other points raised in the objection filed by the United
States, the memorandum said.
“Accordingly, the debtors submit that each ground for
objection laid out in the CBP Objection should be over-
ruled,” it said.
—STEVE SUTHERLIN
continued from page 1
FURIE BANKRUPTCY
CO2 from NWR Sturgeon Refinery It has a maximum capacity of 15 million metric tons a
year of CO2, representing about 20% of oil sands emis-
sions.
The ACTL will carry CO2 from the NWR Sturgeon
Refinery, which processes oil sands bitumen and itself
only started operations earlier this spring, and a fertilizer
plant, both near Edmonton.
The line terminates at a storage reservoir near Red
Deer, in central Alberta, with the CO2 being used for
enhanced oil recovery which could extend the operating
life of an Enhance oil field by 20 to 30 years, said com-
pany chief executive officer Kevin Jabusch.
“It has been a long time coming and is probably sweet-
er as a result,” said Jabusch.
“We went through as few cycles ... economic cycles, a
couple of political cycles. It survived all those and we
pulled together a group and a couple of partners and got
it fully finance in the fall of 2018,” he said.
Designed to capture CO2 NWR Sturgeon President Kerry Margetts said his
refinery was one of the first in the world that was
designed “from the original concept to capture CO2. (The
ACTL) fulfills our objective of being a very low carbon
CO2 emission refinery, which is really the refinery of the
future.”
Jeff Pearson, president of Wolf’s carbon business unit,
said that by permanently capturing and storing the CO2
the ACTL would effectively remove the equivalent emis-
sions from 339,000 cars.
He said the pipeline “is an industrial solution for a big
problem and I think it is just the beginning.”
Wolf will now look for “more opportunities to get
more CO2 and grow the system,” he said.
Another large carbon capture project is Shell Canada’s
Energy Quest at the Scotford bitumen upgrader 40 miles
east of Edmonton. It carries a price tag of C$1.35 billion
but has yet to receive a final investment decision.
Jabusch said he hopes others around the world will
take note of what ACTL is going and give Alberta recog-
nition as “a leader in decarbonizing both energy and other
businesses.”
Alberta Energy Minister Sonya Savage said Alberta
has again demonstrated “game-changing innovation that
strengthens our reputation as a responsible energy pro-
ducer.”
—GARY PARK
continued from page 1
CO2 PIPELINE
Contact Steve Sutherlin at [email protected]
tion period for the virus, send people off-
shore and have them work for 14 days
and then the next group coming in would
have to self-quarantine and isolate for 14
days.
“It really helped us work through the
operational protocol that then was
applied to the North Slope of Alaska
where we had 4,000 workers, and to our
offshore operations in Norway and else-
where around the whole world.”
ConocoPhillips China Inc. is a wholly
owned subsidiary of Houston-based
ConocoPhillips.
Lance also said ConocoPhillips was
able to weather the COVID-19 crisis
without layoffs.
“Our China office is back to full
capacity as of a week ago,” he said, not-
ing other ConocoPhillips locations were
also progressing back to full operations,
such as Bartlesville, Oklahoma, where
the company is going into Phase 2, with
half the employees working in the office
at a time.
—KAY CASHMAN
Fortune releases stats on Hilcorp
FOUNDED IN 1989, Houston-based
Hilcorp is a privately owned company
and therefore not a lot is publicly known
about its finances, although its produc-
tion performance in the oil and gas fields
in which it operates is well-documented
in state and federal public records. (In
addition to Alaska, which it entered in
2012, Hilcorp operates in Alabama,
Colorado, Louisiana, New Mexico, Ohio,
Pennsylvania, Texas and Wyoming.)
Because Hilcorp’s has been on
Fortune magazine’s list of the Top 100
Great Places to Work for the last seven
years (No. 70 in 202) its annual revenues
are published by Fortune.
Hilcorp’s 2019 revenue was $3.99 bil-
lion, as compared to the two other most
active North Slope explorers —
ConocoPhillips’ 2019 revenue was
$36.67 billion and Oil Search’s $1.59
billion. All three companies are inde-
pendents.
Other interesting Hilcorp stats
released by Fortune include:
• 93% of its 2,336 employees voted
Hilcorp was a great place to work.
• 32% of employees are millennials,
42% Gen. X, and 26% baby boomers.
• 42% have been with the company
for 2 years, 26% for 2-5 years, 20% for
6-10 years, 8% for 11-15 years, 3% for
16-20 years, and 1% for more than 20
years — a tribute to steady growth.
• Perks of the job include on-site fit-
ness/subsidized gym, on-site medical
care facility and health insurance for
part-timers.
Fortune’s review said Hilcorp “chal-
lenges its employees to think in terms of
Big Hairy Audacious Goals,” which are
the “lofty performance goals it sets every
five years.”
To meet these goals, Hilcorp “CEO
Greg Lalicker believes total transparency
is a must, from frontline employees to
the CFO. All financials, cash flow,
investments, oil and gas price impacts,
BHAG progress reports, and other criti-
cal information are shared in monthly,
companywide lifting cost meetings,”
Fortune wrote.
“It blows your mind to be in your first
lifting-cost meeting and hear super-secret
information,” one new hire was quoted
as saying.
—KAY CASHMAN
White House memo on U.S. Arctic interests
A MEMORANDUM on Safeguarding
U.S. National Interests in the Arctic and
Antarctic Regions was released by the
White House June 10. The memorandum
calls for assets and resources in the
Arctic to ensure a persistent U.S. pres-
ence in the area, including a fleet of
polar security icebreakers that is opera-
tionally tested and fully deployable by
Fiscal Year 2029.
“We are an Arctic nation because of
Alaska, and I’m grateful that both my
colleagues in Congress and the White
House appreciate the strategic impor-
tance of the Arctic to our national securi-
ty,” U.S. Sen. Dan Sullivan, R-Alaska
said in response to the memo.
“At long last, the federal government
has woken up to the fact that the Arctic
is a region of great strategic competition.
Unfortunately, our adversaries are well
ahead of the United States when it comes
to Arctic infrastructure. We have one
heavy and one medium functioning
Polar-class icebreakers, while Russia has
more than 50.”
Read the full memorandum here:
https://www.whitehouse.gov/presidential-
actions/memorandum-safeguarding-u-s-
national-interests-arctic-antarctic-
regions/
Drones continue to gain in popularity
ACCORDING TO A RECENT
REPORT in the Houston Business
Journal, the Railroad Commission of
Texas, which regulates that state’s oil and
gas industry, has launched a fleet of eight
drones that allow RRC inspectors to
immediately monitor industry emergency
situations.
As part of the new program, 19 agency
inspectors received remote pilot certifica-
tion from the Federal Aviation
Administration. The drones are equipped
with thermal cameras and one was used to
detect a leak at an oil well in the Permian
Basin's Reeves County, HBJ reported.
More recently, Scout Drone Inspection
of Trondheim, Norway, and DNV GL of
Hovik, Norway, have completed a suc-
cessful test inspection of a 64-foot high
oil tank on board a floating production,
storage and offloading vessel, the compa-
nies said in a June 9 release.
Altera Infrastructure hosted the test on
Petrojarl Varg as part of its drive to
improve safety and efficiency through
innovative technology, the companies
said. The video was live streamed from
the North Sea port of Skipavik-Gulen, via
Scout’s cloud-system back to Altera’s
headquarters in Trondheim, where the
footage was monitored by engineers. The
video was interpreted in real-time by an
algorithm to detect cracks in the structure.
The tanks are tough work environ-
ments, with surveyors often having to
climb or raft into hard to reach corners.
Costs can run into hundreds of thousands
of dollars as the tank is taken out of serv-
ice for days to ventilate and construct
scaffolding.
Closer to home, the Alaska Center for
Unmanned Aircraft Systems Integration at
the University of Alaska Fairbanks is
making strides for oil industry use of
drones in Alaska.
The center flew the country’s first
FAA-approved true beyond-visual-line-of-
sight, BVLOS, domestic flight of an
unmanned aircraft system along the trans-
Alaska oil pipeline corridor last July near
the Chatanika River on the Elliott
Highway.
The flights were a part of the
Unmanned Aircraft Systems Integration
Pilot Program, a national initiative from
the U.S. Department of Transportation
and the White House.
—STEVE SUTHERLIN
AOGA 2020 conference cancelled
AFTER “CAREFUL CONSIDERA-
TION of the ongoing coronavirus
(COVID-19) situation, its impact on the
oil and gas industry, and with the health
and safety of all participants in mind, we
have decided not to hold this year’s
AOGA Conference,” the association’s
President and CEO
Kara Moriarty said
in a June 3 press
release, asking peo-
ple to save June 3,
2021, in Anchorage
for the next confer-
ence.
All registration
fees will be refunded
or rolled over to the
2021 conference.
In closing, Moriarty said the single
most critical policy issue facing Alaska’s
oil and gas industry today is Ballot
Measure 1, an oil tax ballot measure that
“would have a drastic impact hindering
Alaska’s economic recovery. While
AOGA intends to face this head-on, we
can’t do it alone.”
She invited people to join the
OneAlaska campaign at
https://www.onealaska.com/ and “VOTE
NO on this misguided ballot measure to
ensure a positive economic future for our
great state.”
—KAY CASHMAN
PETROLEUM NEWS • WEEK OF JUNE 14, 2020 11
DDependa vable Ser e Sincvic 98e 18cDisitV
Dependadoug.Sourt www
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continued from page 1
INSIDER
KARA MORIARTY
The silhouette of one of eight drones recently launched by the Railroad Commission of Texas.
RA
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12 PETROLEUM NEWS • WEEK OF JUNE 14, 2020
715 L Street, Suite 100
Anchorage, Alaska 99501
907-865-5700
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Erika Nortemann (bottom)
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