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GENERAL INTEREST QUICK TAKES
Moody’s: Venezuela in ‘deeper’ stress phase
Falling oil production has pushed hard-pressed Venezuela into
“a deeper phase of economic stress,” warns Moody’s Investors
Service. Because of mismanagement and underinvestment,
Venezuelan production is falling faster than crude-price stabilization can offset financially, Moody’s says in a research note.
After falling to nearly a 3-decade low in October 2017, Venezuelan crude output dropped further to 1.837 million b/d in
November. Contrary to predictions of a rebound by new Oil
Minister Manuel Quevedo, new data from the government indicate another decline in December.
Production now is about 1.621 million b/d, and Moody’s
expects production to fall below 1.5 million b/d later this year.
“The fall in production will only exacerbate cash-flow
stress,” Moody’s writes in a research note. “While oil prices
have rallied in recent months, the decline in oil production
will more than offset the would-be increase in dollar inflows
from oil exports.
“This has negative implications for both debt repayment
capacity and Venezuela’s already grim economic outlook.”
Moody’s sees “a negative feedback loop between declining
production across all economic sectors, accelerating scarcity of
hard currency, and an economic policy mix defined by price
controls and forced discounting that exacerbate supply short-
ages and hyperinflation.”
The credit-monitoring firm earlier expected inflation to
moderate this year after exceeding 1,800% in 2017.
“However, the latest production news suggests that hyperinflation will persist,” the firm says. “We now expect it to accelerate to well over 4,000% this year due to falling production
capacity and the current policy mix.”
WPX exits San Juan basin with $700-million sale
WPX Energy Inc., Tulsa, will exit the San Juan basin with an
agreement to sell its Gallup oil play holdings for $700 million
to an undisclosed buyer who will also assume the associated
Gallup oil production averaged 10,800 b/d in third-quarter
2017. Overall, the Gallup position represented less than 5%
of WPX’s gross undeveloped locations. With the sale, WPX
WPX previously divested natural gas assets in the San Juan
basin for $175 million and a gathering system in the basin for
$309 million. Capital previously earmarked for the assets will
be reallocated to the company’s two remaining core positions
in the Delaware (Permian) and Williston basins. WPX has
100,000 net acres in the Delaware basin, with the majority in
Loving County, Tex., and Eddy County, NM. The company’s
operations in the Willison basin span 85,000 net acres on the
Fort Berthold Indian Reservation.
Ridge Runner launched with equity from Warburg Pincus
Newly formed Ridge Runner Resources LLC, Midland, Tex.,
plans to pursue partnerships with other exploration and production companies and acquire acreage positions across the
Delaware basin with a line of equity financing of as much as
$300 million from Warburg Pincus.
Ridge Runner is led by CEO Scott Germann, a geologist with
20 years of financial and operational experience in the Permian basin. Germann grew and led Nadal & Gussman’s Permian business over the last few decades. Most recently, Germann
served as president of BC Operating, where he led the company’s oil and natural gas exploration, development, and production efforts in the Delaware basin until the sale of the company
to Marathon Oil for $1.1 billion in June 2017.
The senior executive team includes Chief Financial Officer
Tim Patuwo, Chief Operating Officer Kelvin Fisher, and Vice-Pres., Business Development Brian Cassens.
Vine Oil & Gas, GEP Haynesville exchange basin assets
Vine Oil & Gas LP, Plano, Tex., and GEP Haynesville LLC, The
Woodlands, Tex., exchanged non-operated Haynesville basin working interests in the majority of Vine and GEP’s joint venture assets in
Red River, DeSoto, and Sabine parishes in northwestern Louisiana.
The exchange unwinds a portion of the joint venture area of
mutual interest and allocates to each party the entirety of the
future development. For the past 2 years, the companies worked
together to implement enhanced completion techniques.
Vine and GEP continue to share joint ownership in 50 producing wells that were brought online in 2015 and 2016, and
which were excluded from the exchange.