Untitled Document
Untitled Document

Total to cut US shale gas investment

Not long ago, supermajors, both foreign and domestic, entered into multi-million and multi-billion dollar agreements with US independents to get in on the North American shale gas boom. With deflated gas prices, it seems some companies may be looking to decrease their level of investment.

RBC Capital Markets analyst Peter Hutton reported in a note to investors Thursday that Total’s CEO Christophe de Margerie confirmed to French newspaper Le Monde that the company will decrease additional investments in US gas.

Christophe de Margerie, Total

In January 2010, Total paid $800M to enter the US shale gas business—earning a 25% interest in Chesapeake Energy Corp.’s gassy Barnett Shale assets by way of a joint venture agreement. The assets subject to JV include roughly 270,000 net acres of leasehold in the Barnett, approximately 700 million cubic feet of natural gas equivalent per day of current net production and approximately 3.0 trillion cubic feet of natural gas equivalent (tcfe) of proved reserves (0.75 tcfe net to Total).

At the time the deal was announced, de Margerie told OGFJ that the transaction provided support for Total to "further build the gas value chain position that has been established in the US, the world's largest and most liquid natural gas market, with our existing capacity rights in the Sabine Pass LNG terminal and our gas trading and marketing organization."

Gas prices
Fast forward a few years and the gas market is not what may have been expected. According to Hutton, Margerie told Le Monde that Total planned on $6/mcf (Henry Hub is now $3.2/mcf).

Hutton goes on to say that the move “is further confirmation both of what we have seen at other companies (e.g., Shell, BG and BP) and the IHS rig count indicator, with Chesapeake down to 4 rigs reported last week in the Barnett Shale from 14 in January last year. Our estimates assume growth of 20kboed in 2012 and 10 kboed in 2013, equivalent to 0.4% of total production.”
 
“BG has already taken a writedown on some US gas assets to estimated values at $4/mcf, and this confirmation may signal a similar action by Total, although long time price assumption may differ (RBC long term forecast is $5/mcf, as in our Commodity Price Update report 8th January 2013),” Hutton concluded.

Related Articles

Parsley Energy joins Russell indexes

07/01/2014 Parsley Energy Inc. has been added to the broad market Russell 3000, small-cap Russell 2000, and Russell Global indexes, along with appropriate style, sector, and country indexes, effective after t...

Chesapeake completes spin-off of oilfield services business

07/01/2014 Chesapeake Energy Corp. has completed the spin-off of its oilfield services business, previously conducted through Chesapeake Oilfield Operating LLC, into a stand-alone, publicly traded company cal...

CorEnergy set to join Russell indexes

06/30/2014 CorEnergy Infrastructure Trust Inc. is expected to join the small-cap Russell 2000 Index, the broad-market Russell 3000 Index, the Russell Microcap Index, and the Russell Global Index as part of Ru...

IHS: Escalating costs driving diminishing returns for oil and gas companies despite stronger oil prices

06/27/2014 Despite stronger oil prices, corporate returns on average capital employed (ROACE) are lower than in 2001, when oil prices were less than $30 per barrel, according to research from information and ...

Lilis Energy regains NASDAQ compliance

06/20/2014 Lilis Energy Inc. has been informed by the NASDAQ Stock Market that, based on the June 11 and 17 filings of the company's Form 10-K for the fiscal year ended December 31, 2013, and Form 10-Q for th...

More Oil & Gas Financial Articles

Parsley Energy joins Russell indexes

Tue, Jul 1, 2014

Parsley Energy Inc. has been added to the broad market Russell 3000, small-cap Russell 2000, and Russell Global indexes, along with appropriate style, sector, and country indexes, effective after the market close on June 27, in association with Russell Investments’ annual reconstitution of its comprehensive set of US and global equity indexes.

Chesapeake completes spin-off of oilfield services business

Tue, Jul 1, 2014

Chesapeake Energy Corp. has completed the spin-off of its oilfield services business, previously conducted through Chesapeake Oilfield Operating LLC, into a stand-alone, publicly traded company called Seventy Seven Energy Inc.

CorEnergy set to join Russell indexes

Mon, Jun 30, 2014

CorEnergy Infrastructure Trust Inc. is expected to join the small-cap Russell 2000 Index, the broad-market Russell 3000 Index, the Russell Microcap Index, and the Russell Global Index as part of Russell Investments' annual reconstitution of its US and global equity indexes.

IHS: Escalating costs driving diminishing returns for oil and gas companies despite stronger oil prices

Fri, Jun 27, 2014

Despite stronger oil prices, corporate returns on average capital employed (ROACE) are lower than in 2001, when oil prices were less than $30 per barrel, according to research from information and insight provider IHS (NYSE: IHS).

Lilis Energy regains NASDAQ compliance

Fri, Jun 20, 2014

Lilis Energy Inc. has been informed by the NASDAQ Stock Market that, based on the June 11 and 17 filings of the company's Form 10-K for the fiscal year ended December 31, 2013, and Form 10-Q for the period ended March 31, 2014, respectively, that the company complies with the periodic filing requirement of Rule 5250(c)(1).


Most Popular

Oil & Gas Jobs

Search More Job Listings >>
Subscribe to OGFJ