page 3 l FINANCE & ECONOMY l EXPLORATION & PRODUCTION l GOVERNMENT 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 A fter 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 T he 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 E merging 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.”
Transcript
page
3
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.”
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
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.
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:
P.O. Box 231647 Anchorage, AK 99523-1647) Subscription prices in U.S. — $118.00 1 year, $216.00 2 years
Canada — $206.00 1 year, $375.00 2 years Overseas (sent air mail) — $240.00 1 year, $436.00 2 years “Periodicals postage paid at Anchorage, AK 99502-9986.”
POSTMASTER: Send address changes to Petroleum News, P.O. Box 231647 Anchorage, AK 99523-1647.
www.PetroleumNews.com
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
judypatrickphotography.comCreative photography for the oil & gas industry.
907. 258.4704
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
Oil & gas companies investing in Alaska’s future
Explorers
The Explorers, an annual publication from Petroleum News
Raven Alaska – Jon Adler Resource Development Council SALA Remote Medics Security Aviation Shoreside Petroleum Soloy Helicopters Sourdough Express . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Strategic Action Associates Summit ESP, A Halliburton Service Tanks-A-Lot The Local Pages TOTE – Totem Ocean Trailer Express Weston Solutions Wolfpack Land Co.
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
URT
ESY
LY
ND
EN
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-
