Study Group: Casing Oilfield Equipment Experts

GLG News^SM Analyses by this Study Group's Leading Experts(?)

Iraq's Tough Fiscal Terms for Oilfields Rejected by the Industry - Except BP

July 1, 2009

Analysis by:Robert Hinkel, Chief Operating Officer,

Analysis of:Oil Companies Reject Iraq's Contract Terms | online.wsj.com

The "service contracts" recently offered by the Iraqi government for oil companies to develop their huge resources represent some of the most difficult issues for the global oil companies to face.  The fact that BP accepted the contract, despite only taking a $2/bbl margin that is oblivious to oil price changes, suggests that they are taking a long-term view of the Iraqi opportunities for the fact is that a project like this, no matter what the size, cannot compete on a profitability basis in BP's global opportunity portfolio.  In fact, oil companies have always feared and resisted these types of contracts since they do not allow the oil companies to book reserves under the normal regulatory and financial systems in the US and elsewhere.

Reserves vs. Resources

June 30, 2009

Analysis by:Dennis Fagerstone, Consultant,

Analysis of:Estimate Places Natural Gas Reserves 35% Higher | www.nytimes.com

This article correctly states that new technology has opened many areas in the US and worldwide for natural gas development. The 35% increase, however, is for resources, which is very different than reserves. These resources must be proven to be commercialy feasible for development before classification as reserves. At natural gas prices below $6/mmbtu, only 20-30 % of these resource plays in the US are commercial at present development cost levels. The quality of these unproven supplies must also be confirmed by drilling and testing. Adequate natural gas prices will be necessary to support development and conversion of this gas to reserves. 

Exxon in Indonesia - A Sign of the Changing Political Fortunes of a US Super-Major

April 20, 2009

Analysis by:Robert Hinkel, Chief Operating Officer,

Analysis of:Indonesia says Exxon halts Cepu oil output | www.reuters.com

Exxon's almost insignificant production in Indonesia was stopped this week; ostensibly because the company had not properly permitted their pipeline with the local gov't officials.  However, the only reason that Exxon was producing any oil at all at this point in time was at the request of the central government in Jakarta.  What this show again is the weakness of Exxon's historical strategy of dealing with central governments.  This strategy will have to adapt as the company faces increasing competition from national and independent oil companies who are better positioned to deal with local issues.

Domestic Natural Gas Remains the Key to the OPEC Importation and the Global Warming Issues

March 9, 2009

Analysis by:Robert Hinkel, Chief Operating Officer,

Analysis of:Pickens vs Geithner on Energy Policy | www.thestreet.com

With the Obama administration treating oil and gas in the same fashion for tax purposes, there will almost certainly be a further downturn in domestic rig count and a severe depression in earnings for the likes of Chesapeake, EOG, St Mary's, XTO, and EOG...not to mention BP, CoP, and RDS.  With Henry Hub gas prices at 6+ year lows, the length and breadth of the downturn in US domestic drilling depends heavily on whether or not Geithner "gets it" in terms of the value of domestic gas production. 

New LNG Combined with already ample supplies could keep domestic prices low for 2 yrs or more.

March 6, 2009

Analysis by:Robert Hinkel, Chief Operating Officer,

Analysis of:New LNG Imports Could Further Slam US Natural Gas Prices | www.rigzone.com

With gas prices already low and pipelines full, the question now is how much further prices could fall if new LNG enters the supply scene.  This LNG will have to be unloaded and, unlike oil, there is no place for storage of these volumes.  So, as they hit the market, the question is what gas supplies will be pushed out of the market and may need to be shut it.  And, at what price and what time frame will the situation change.  

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