Following successful offshore drilling campaigns, oil and gas company Spirit Energy has boosted production from two North Sea fields.
According to Spirit Energy’s update on Friday, the first gas from the new C6 well at Spirit Energy’s Chiswick field in the Southern North Sea was achieved on March 11, 2020, and has added up to an additional 15 million standard cubic feet of gas per day to the field.
The Chiswick field, around 75 miles off the coast of Norfolk, has been producing gas since 2007. The new well brings overall production from the Greater Markham Area (GMA) to 110 million standard cubic feet of gas per day – enough to heat nearly 950,000 homes.
The development well, completed two months ahead of schedule, is expected to help extend life of the GMA hub to 2028.
The GMA hub spans both the UK and Dutch Continental Shelves, and comprises the Markham, Chiswick, Grove, and Kew fields.
The Chestnut field is located in block 22/2a of the UK Continental Shelf (UKCS), in 117m water depth.
Initial expectation when the Chestnut field first came online more than a decade ago was for a little over two years’ production.
First oil from the new Chestnut well was achieved on March 19, 2020. Thanks to the £56 million ($67.32M) investment from Spirit Energy and Dana Petroleum in the new well and a contract extension with Teekay Corporation for the Hummingbird Spirit FPSO, another 2.5 million barrels have been unlocked, Spirit Energy explained.
Neil McCulloch, Executive Vice-President Technical & Operated Assets, said: “The results from the new well at Chiswick exceeded our expectations and will provide us with valuable data to identify further drilling targets in the area.
“At the same time, the work our teams have done alongside our partner Dana Petroleum and our supply chain colleagues, notably Teekay Corporation and Altera Infrastructure, to maximise the potential of the Chestnut field has been exceptional and is making this field a notable success story.
“The industry faces unprecedented challenges but, taken together, the additional gas and oil from Chiswick and Chestnut provide a boost to production from two UK fields at a time when the secure supply of energy is critical.”
Joining other oil and gas operators in actions to safeguard their businesses amid coronavirus crisis and the oil price war, Austrian oil and gas company OMV has decided to reduce its investments in 2020 by 20 percent, cut costs by around $217 million, and delay acquisition projects.
The global spread of the coronavirus has abruptly transformed people’s lives and significantly worsened the economic environment. OMV said on Thursday that it is responding to this situation with targeted measures to safeguard the company’s economic stability and the secure supply of energy.
Rainer Seele, Chairman of the Executive Board and CEO of OMV: “We made provisions for every employee to work from home parallel to the national exit restrictions in movement. Employees who are critical to the business or supply security are the only ones working in the field and they are subject to stringent safety and hygiene standards – to protect them and to protect all of our partners and customers”.
At the same time, OMV said it is implementing targeted measures to safeguard the company’s financial strength. In this context, the executive board has approved an action plan of more than EUR 4 billion ($4.4B) for the year 2020.
This includes a reduction of around EUR 500 million ($547.7M) in organic investments to below EUR 2 billion ($2.19B) in 2020. This is a reduction of more than 20% compared with the originally planned investments of EUR 2.4 billion ($2.6B) for 2020.
It also includes cutting costs by around EUR 200 million ($216.5M) compared to 2019 (opex and exploration expenditures).
Furthermore, OMV’s measures include payment of the purchase price for the additional 39% share in Borealis in two tranches, whereby more than EUR 2 billion ($2.2B) will not be due until the end of 2021. The effective closing date of this transaction is unaffected.
Finally, it includes postponing investment and acquisition projects totaling EUR 1.5 billion ($1.6B), in particular the interest in Achimov 4/5 in Russia.
“These measures will safeguard OMV’s ability to act in this challenging situation. Specially established task forces are monitoring developments very closely in order to make any necessary strategic adjustments at the right time”, said Rainer Seele.
Danish offshore drilling contractor Maersk Drilling has received a notification from Tullow Oil of early termination for convenience of the drilling contract for the drillship Maersk Venturer.
Maersk Drilling said in a statement on Tuesday that the drillship Maersk Venturer has been working for Tullow offshore Ghana since February 2018.
The contract, signed in late 2017, was for development drilling on the Jubilee and TEN fields offshore Ghana. It was expected to end in February 2022. However, following Tullow’s early termination decision, the rig is now expected to end the contract in June 2020.
As a consequence of the termination, Maersk Drilling’s revenue contract backlog is reduced by $175 million covering the period from the end of the contract to February 2022.
Subject to commercial prospects, Maersk Drilling said it would take measures to reduce Maersk Venturer’s operating costs following the end of the contract.
Maersk Drilling maintains the profitability guidance for 2020 of EBITDA before special items of $325-375 million.
Namely, as a response to the current market situation, EnQuest decided to reduce its costs. For 2020, the company is targeting base operating expenditure savings of c.$150 million, which would lower operating costs by c.30% to c.$375 million.
As a result of an unprecedented combination of a global pandemic coupled with a dramatic fall in oil prices, Norwegian oil and gas company OKEA will postpone all project sanction decisions and, where possible, further cancel sanctioned plans.
OKEA said on Friday that its board of directors and the management team have been working closely together over the past weeks to assess and understand the impacts of this on the business, and to put a series of mitigations in place that will ensure the company is able to withstand the current market conditions for an extended period of time.
OKEA stated it is in a very strong financial position. Currently, the company has a significant cash reserve of NOK 1.2 billion and its operated Draugen field, which provides a substantial proportion of the company’s revenues, has low lifting costs of less than 20 $/bbl. It will therefore remain a positive contributor to the company even at current oil prices. The next OKEA Draugen lifting is scheduled for May and this has been hedged just below 50 $/bbl.
The OKEA01 Bond was successfully refinanced and in 4Q 2019 and replaced by a new facility, OKEA03. This means that the company does not face any bond maturities until 2023 or refinancing requirements in the short term and has enough cash available to withstand a sustained period of low oil prices.
However, in a continuing low oil price scenario certain bond covenants may temporarily become in technical breach. The company said it is monitoring this closely and is prepared to take necessary actions going forward if required.
Importantly, the company does not have any RBL facilities which could be at risk of redetermination.
In addition to this, the company noted it has substantial flexibility to reduce expenditure through focused cost reduction measures, together with the deferral of non-essential activities into 2021 or beyond.
Deferrals & cancellations
The company also said it will postpone all project sanction decisions, such as drilling or seismic programs.
OKEA will further cancel sanctioned plans where possible and as agreed with joint venture partners. These measures will result in reductions to previously planned exploration expenditure of around 90% for the rest of the year.
The Yme project remains on schedule and OKEA is working closely with the operator, Repsol, and the other JV partners to understand and mitigate the impact that restrictions (particularly travel restrictions) caused by the COVID -19 pandemic may have on the project. The project is still on schedule for first oil in second half of 2020.
The company has put in place a series of measures designed to protect our employees and to ensure full continuity on OKEA operated projects, particularly at the Draugen field.
“Our staff are now predominantly working from home and minimising social contact, and we have also stopped all business travel. On Draugen, we have introduced a policy that increases time spent offshore and reduced offshore manning levels from 70 to 37. We closely monitor the health of offshore staff and are taking measures to ensure that anyone who has been (or may have been) in contact with someone infected with the virus does not travel offshore,” OKEA said.
OKEA has always believed that consolidation of small-medium sized players on the Norwegian Shelf is inevitable and the current situation is likely to accelerate that. OKEA believes it is in a strong position to take advantage of any opportunities that may arise and will continue to seek out new inorganic growth opportunities.
Offshore helicopter operator Bristow has configured three of its helicopters for transporting coronavirus cases.
Bristow Helicopters has repatriated offshore workers in the oil and gas industry with suspected cases of the novel coronavirus – COVID-19 – using three specially-configured former search and rescue aircraft, the company said on Thursday.
Three suspected COVID-19 cases have been flown from offshore installations in the North Sea since Wednesday, March 18, in one of the dedicated aircraft, introduced to support the industry’s response to the pandemic and not for use for general crew change flight activities.
Alan Corbett, Senior Vice President for Bristow’s Europe, Africa, Middle East and Asia area, said: “The safety, health and welfare of our workforce, customers and the public we support around the world is of the utmost importance to Bristow, which is why we moved quickly to develop a solution for transporting those suspected of contracting the virus.”
According to Bristow, each of the Sikorsky S92 helicopters being deployed has undergone specific modifications to ensure the necessary separation is provided between flight crew, an on-board medic travelling with each flight to provide passenger monitoring support, and passengers with suspected COVID-19.
As the aircraft are purpose fit for a search and rescue role, they have a different seating configuration to crew change helicopters, ensuring appropriate separation can be maintained between those on-board.
Numerous preventive barriers are also installed including protective curtains separating the cockpit from the passenger area and airflow systems, while specific entrance and exit points are provided for each of the flight crew, paramedic and passenger to further ensure required distance is maintained.
Each aircraft undergoes a full decontamination process after every flight, assisted by the rugged waterproof seating and a fully waterproof floor which is included in their search and rescue role configuration.
Matt Rhodes, director UK and Turkmenistan Oil & Gas at Bristow Helicopters, said: “The successful introduction of these dedicated aircraft for suspected COVID-19 cases is a key indication of Bristow’s commitment to supporting the energy industry in what are extremely challenging circumstances.
“This service has been established with approval from the CAA, and the support of Oil and Gas UK, our client base and the relevant health authorities – and we remain in continuous dialogue with those organisations.
“Having completed two repatriation flights on behalf of clients in the UKCS, we are pleased to be able to confirm we now have three dedicated aircraft available to companies across the energy sector.
“We are now exploring further options for other parts of the UK, and other industries, as the national response to the coronavirus outbreak gathers pace.”
In light of recent developments in the oil market, oil and gas company EnQuest has decided not to re-start production at the Heather and Thistle/Deveron fields located offshore the UK.
EnQuest was in October 2019 forced to evacuate workers from its Thistle platform following an inspection relating to a support element on a redundant subsea storage tank. During the same month, a small fire broke out on the Heather platform and two workers were injured. Production at Heather had been shut down for maintenance prior to the incident.
Production has been shut down at both platforms ever since. EnQuest previously planned to restore production at both platforms in the first half of 2020.
In an update on Thursday EnQuest said it had reviewed each of its assets and related spending plans in light of the current lower oil price environment.
EnQuest’s updated working assumption is not to re-start production at the Heather and Thistle/Deveron fields. Total combined production from these fields in 2019 was c.6,000 Boepd.
At the same time, the company is implementing a material operating cost and capital expenditure reduction program. This action will significantly lower EnQuest’s cost base, with group free cash flow breakeven targeted at c.$38/Boe in 2020 and $35/Boe in 2021, the company explained.
For 2020, the company is targeting base operating expenditure savings of c.$150 million, which would lower operating costs by c.30% to c.$375 million.
In 2021, the group is targeting unit operating expenditures of c.$15/Boe. These savings are driven primarily by cost savings at Heather and Thistle/Deveron, but also through the removal of non-critical and discretionary operating expenditures and support costs.
The company’s 2020 cash capital expenditure is also expected to be reduced by c.$80 million to c.$150 million. The majority of the group’s 2020 program relates to the recently concluded drilling program at Magnus and the two-well program now underway at Kraken, with approximately $50 million of 2020 cash capital expenditure relating to the phasing of cash payments into 2020.
The group’s 2021 capital expenditure program is expected to reduce further, although production is also likely to be impacted as a result.
The group retains significant liquidity with cash and available facilities of $268.2 million at February 28, 2019.
EnQuest Chief Executive, Amjad Bseisu, said: “Over the last few years, EnQuest has made significant progress in strengthening the business with our three world-class assets in Kraken, Magnus and PM8/Seligi, and a materially reduced debt position.
“Given the prevailing low oil price environment, we are taking decisive action to reduce operating and capital expenditure in 2020 and beyond, with a view to targeting cash flow breakeven of c.$35/Boe in 2021. While these actions have reduced our production expectations, free cash flow has improved and with no senior credit facility amortizations due in 2020 and long-dated bond maturities, we are positioning ourselves to manage through the current low oil price environment.”
It is also worth mentioning that offshore accommodation specialist, Prosafe, has recently been awarded a contract to provide accommodation in support of the redundant subsea tank removal and safe re-habitation of the Thistle Alpha platform in the UK North Sea.
It is worth noting that Sleipnir’s lift of the Leviathan topside was a world lifting record by a crane vessel.
Named after Odin’s eight-legged stallion, the vessel stands at 220 meters long, 102 meters wide, can accommodate 400 employees, and weighs 119,000 tons.
The semi-submersible vessel has two cranes onboard, each capable of lifting 10,000 metric tons.
Due to Sleipnir’s two large streamlined floats, the vessel can sail relatively quickly – on average, twenty kilometers per hour – with limited fuel consumption. The vessel is dual-fueled and can entirely run on LNG.
The Port of Rotterdam said on Wednesday that Sleipnir was arriving after a successful project execution in Trinidad. During its stay in the Port, the vessel will prepare for future decommissioning work across the North Sea.
“By using Sleipnir, Heerema is working on cleaning up retired drilling platforms in the cleanest possible way with their use of emission-reducing LNG. The vessel is due to depart at the end of March for the first of several jobs,” the Port of Rotterdam stated.
It is worth noting that Heerema’s vessels will soon be powered on 100 percent renewable energy during their stay in the Port of Rotterdam. This will be enabled through the ongoing Shore Power Caland Canal project in collaboration with Eneco.
The Port also stated that no visitors would be permitted to visit the vessel in order to protect the crew from the coronavirus outbreak.