Replies to post #1753 on The Rising Influence of Rising Affluence

[DewDiligence]

Chevron Sees ATLS Gas Output Rising to 100K boe/d

[At such a level, the ATLS gas would be about 4% of CVX's total production.

This write-up from Reuters has a minor error in saying that CVX expects full-year 2010 production of 2.78M boe/d; according to slide #27 from today’s BoaA webcast (http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NzAzMDV8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 ), the actual forecast is 2.75M.]

http://www.reuters.com/article/idAFN119600220101111

›Thu Nov 11, 2010 5:24pm EST
By Braden Reddall

SAN FRANCISCO, Nov 11 (Reuters) - Chevron Corp (CVX) expects the natural gas production of its pending acquisition, Atlas Energy (ATLS), to grow to more than seven times current output, or the equivalent of 100,000 barrels of oil per day.

Chief Executive John Watson, giving no timeline for the production growth from Atlas' Marcellus shale gas properties in western Pennsylvania, said his company had passed up on several shale investment opportunities over the past few years because they did not make sense financially.

"We've waited to get the kind of terms that would give us the control that we wanted in the business," he told the Bank of America Merrill Lynch Global Energy Conference on Thursday, two days after Chevron announced the $3.2 billion Atlas deal.

Watson's targeted level for Atlas output would represent about 1 percent of current U.S. gas production.

Chevron expects its own overall daily oil and gas production to grow 3 percent this year, to 2.78 million barrels of oil equivalent [actually 2.75M—see note in the prologue], with annual growth of 1 percent projected through 2014, and increases of 4 percent to 5 percent in the three years after that [when the mammoth LNG projects in Australia will begin contributing in a materially].

Chevron, the second-largest U.S. oil company, will make more acquisitions in the years ahead, Watson said, while adding, "We're not in a position where we have to do a particular acquisition."

Questions had been raised about Chevron's shale gas strategy ever since larger rival Exxon Mobil Corp (XOM) made shale the talk of the industry last December when it announced its $27 billion acquisition of XTO Energy. The XTO deal more than doubled Exxon's U.S. gas output to 14 percent of its global oil and gas production at a time when U.S. natural gas prices are depressed due to increased output from Marcellus and other shale fields. Eight percent of Chevron's global output is U.S. gas. [This is similar to the % for HES—#msg-56595927.]

Exxon shares have suffered as a result, rising just 5 percent in 2010 versus Chevron's 12 percent gain.

LONG-TERM DEEPWATER COMMITMENT

Affirming Chevron's long-term commitment to the deepwater Gulf of Mexico, Watson said it has equity interests of 50 percent or more in the top 45 Lower Tertiary prospects.

"Everything has been done to get the industry back to work, and we expect more permits to be issued in due course," Watson told the conference in Miami.

San Ramon, California-based Chevron moved ahead last month with a planned $7.5 billion investment in its Jack/St. Malo facility in the Lower Tertiary trend [#msg-55859365], and Watson said a final investment decision on the Big Foot project in the Gulf would come by the end of this year.‹

[DewDiligence]

Chevron Piles Into Marcellus Shale—Again

http://online.wsj.com/article/SB10001424052748703849204576302803218156000.html

›MAY 4, 2011, 8:31 A.M. ET
By ISABEL ORDONEZ

Chevron Corp. is doubling down on a big natural-gas bet by expanding its reach into a large swathe of Pennsylvania.

Just three months after completing its acquisition of gas producer Atlas Energy [#msg-56505666, #msg-56610359], Chevron is buying drilling and development rights for another 228,000 acres in the Marcellus shale, a rock formation underlying several states in the Northeast that has become one of the most prolific sources of natural gas in the U.S.

While Chevron didn't disclose the price it paid for the additional acreage, analysts estimate that the San Ramon, Calif.-based company paid more than $1.6 billion, based on the amount of gas reserves involved, which are roughly half that of the Atlas Energy deal. In that previous transaction, Chevron paid a little less than $9,000 per acre, according to Argus Research.

Two closely held firms, Chief Oil & Gas and Tug Hill Inc., were the sellers.

"We are taking this step because the price is good and the assets are very complementary with the [Atlas] acquisition we made," Gary Luquette, Chevron's president for North American exploration and production, said in an interview.

So-called shale gas, which is extracted by fracturing the underground rock and then pushing water through cracks to release hydrocarbons, has seen a frenzy of deal making over the past several years. More recently, the world's biggest energy companies have snapped up assets. Exxon Mobil Corp. purchased XTO Energy for $25 billion in 2010, and BP PLC and Royal Dutch Shell PLC have staked out territory in the U.S.

The rapid emergence of shale gas has sent gas prices plummeting in North America, which currently doesn't have many facilities to export the gas in liquid form via seaborne shipments. Pressured by prices that average about $4 a million British thermal units, smaller companies are taking advantage of the majors' interest and selling to pay down debt and avoid funding expensive capital expenditures.

For companies like Chevron, low gas prices aren't the only risk. Shale-gas drilling has come under increased scrutiny amid clashes with environmentalists and regulators over the chemicals used in the fracturing process, called "fracking" in industry parlance. Concerns about the safety of drilling activity were heightened last month by two separate accidents in Pennsylvania. A chemical spill at a Chesapeake Energy Corp. natural gas well leaked into a stream and forced the temporary evacuation of families in the area, and a blowout at a gas well owned by closely held CEL Properties forced the evacuation of more than 100 nearby residents.

The purchase of additional acreage shows Chevron's feels "comfortable" with its ability to meet any new regulations aimed at governing natural-gas drilling and protecting drinking-water supplies in the U.S., Mr. Luquette said.

"Our company has confidence that we can operate with this new heightened expectations from the regulator and the public," he said. "Our internal expectations exceed the regulations of what the state of Pennsylvania requires."

Pennsylvania's environmental regulator last month ordered 15 water-treatment facilities in the state to comply with tighter regulations and to stop accepting wastewater from drilling operations.

The deal, which is expected to close before the end of the second quarter, is part of a strategy implemented by Chevron last year aimed at acquiring large positions of difficult-to-develop oil-and-gas acreage in early stages of development. The company intends to employ the latest technology from the U.S., the forerunner in shale development, to maximize output.

Over the last year, Chevron has acquired nearly five million net acres of shale gas assets in the U.S., Canada, Poland and Romania.

The deal announced Wednesday boosts the company's gas resources, a more liberal indicator of the amount of gas underground than reserves, by five trillion cubic feet, roughly the equivalent of more than three months of U.S. consumption.

Amid a looming shortage of skilled labor in the shale sector, Chevron has made arrangements to retain about 60 employees from Chief Oil & Gas and Tug Hill.

"It's very important that they feel a sense of belonging, and that they don't need to worry about whether they have a job or not," said Mr. Luquette, who was flying to Pennsylvania this week to welcome the workers.

Chevron expects natural gas prices to rebound in the second half of the decade due to rising global demand, he added. "The question is not if, but when."‹