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Linn Energy, LLC Message Board

  • rlp2451 rlp2451 Apr 3, 2012 1:55 PM Flag

    LINE Announces JV With Anadarko

    LINN Energy, LLC
    (Nasdaq:LINE) announced today a joint-venture agreement with an affiliate of
    Anadarko Petroleum Corporation (NYSE:AP C), whereby LINN will participate as a
    partner in the CO2 enhanced oil recovery development of the Salt Creek field,
    located in the Powder River Basin of Wyoming. Anadarko assigned LINN 23 percent
    of its interest in the field in exchange for future funding of $400 million of
    Anadarko's development costs. Over the next three to six years, LINN expects to
    invest a total of $600 million, which includes the $400 million of Anadarko's
    costs and $200 million net to LINN's assigned interest. Anadarko has been
    utilizing CO2 to develop this field since 2004 with outstanding results, and
    additional development associated with this joint venture is expected to double
    current production by 2015. The agreement was signed and closed April 3, 2012.

    "We are excited about this opportunity to partner with Anadarko in the Salt
    Creek field, where Anadarko has successfully implemented world-class CO2
    enhanced oil recovery facilities and infrastructure to i ncrease production,"
    said Mark E. Ellis, Chairman, President and Chief Executive Officer. "We believe
    this long-life asset is unique because it is expected to deliver 10 years of
    steady production growth while, at the same time, providing a low base-decline
    rate. In addition, CO2 can potentially be used to enhance recovery in other
    reservoirs and portions of the field.

    "Consistent with our strategy, we have already hedged all of the current net
    production associated with this joint venture through 2014, and we believe it
    will be immediately accretive to distributable cash flow per unit," added Ellis.
    "We also expect to greatly benefit from the knowledge we will gain by partnering
    with Anadarko, which has extensive experience in CO2 and enhanced oil recovery
    operations. We believe we have the potential to apply this knowledge and
    technology to several of our existing legacy oil fields."

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    • Thanks to everyone for the great insight. It confirms my believe in Linn's strategies.

    • Thanks......i remember back in the late 90's and early 2000's that all the big oil companies said it wasn't worth going back to the old fields, and plowing alot of money into them. basicly because there wasn't enough oil left to go after. This was a big discussion back then.

      thanks

    • Thank you Gerry. Very much appreciated.

      "I'm sure you know this, but pressure alone results in well less than 25% of a typical well's recovery. Water-flooding, which used to be a big deal where I'm from, is not very effective except in certain circumstances."

      As I tell Sand I am no geologist or petroleum engineer. Very easily distracted and my apologies for it. But given how early the LINE management team was in accurately understanding the gas fracturing technology was going to commoditize natural gas AND make a bunch more oil recoverable, I wonder if we are not seeing the early stages of a new technology combination?
      Co2, water handling, plenty of natural gas best kept in the bank for now. I am not up on the geology of this field but I do not believe it is shattered shale.

      Not sure how much standard old time fracturing might have been done.

    • Yes, 40-50% is left but this varies by field geology and history of the field. Conventional recovery (i.e. natural pressure) only gets a small portion. Water flood (i.e. secondary recovery) does another increment.

      CO2 (tertiary recovery) removes another increment.

      Denbury has some good presentations on their website (well, they used to, I have not checked recently).

      Tertiary recovery can be a very cost effective way to recovery oil and what is nice is their is no dry hole risk. The reservoirs have 80+ yrs of production history and you can calculate +/- 10% how much oil was likely in place.

      Kinder is minting money from the Yates and SACROC unitized fields.

      The Russians have botched a lot of their oil fields. Ever see the pics of the run off? They have depleted all of the pressure trying to produce very heavily.

      It takes a lot of upfront effort to attempt a tertiary recovery and it takes a couple of years to turn the corner and start getting good returns.

    • Gerry,

      If i remember correctly russia and kazachastan tried reworking old oil fields and failed horrendously.

      Do you think that 50% is still left in the ground after the big boys finish with the extraction?

      thanks

    • The use of CO2 is cheaper but also the CO2 is more miscible in the oil, which allows it to flow better than natural gas does. CO2 under pressure acts almost like a surfactant in the reservoir.

    • I'm no expert in this, but as I understand it, they use whichever gas is most available. In this instance, it's CO2.

      One company I have a bit of interest in uses cheap natural gas as feedstock for fertilizer production. One of their end products is CO2. They employ that for enhanced oil recovery of over-viscous crude.

      I'm sure you know this, but pressure alone results in well less than 25% of a typical well's recovery. Water-flooding, which used to be a big deal where I'm from, is not very effective except in certain circumstances.

      But you're right: pressurized natural gas is the most effective of the lot, because it enters the crude hydrocarbon morass and, in the process, alters its viscosity, making it more readily recoverable.

      This old field is even older than the Hugoton, which is ancient. However, there is probably an enormous amount of crude left behind. Anadarko very likely plucked the low-hanging fruit and sold it off: it doesn't fit their roadmap.

      It fits Linn's perfectly: buy something on the cheap and rework it, hoping to claim the last 50% from it. The article said that they expect to double its production by 2015. Perfect!

      They know how to do it, too. That's what they do with all those old wells down in the Permian Basin.

      I love this story, because there is no fracking per se. It's hard to pin bubbles in your tap water on an oil company; it's easier if you light your cigarette and catch your coffee on fire (just joking--it's safe).

    • Anadarko Info re: the Salt Creek Field

      http://www.anadarko.com/Operations/Pages/EnhancedOilRecovery.aspx

      "Enhanced oil recovery (EOR), is used to increase the amount of oil that can be produced from mature reservoirs after primary recovery methods have run their course."

      From Wikipedia:

      In United States, the Department of Energy (DOE) has estimated that full use of 'next generation' CO2-EOR in United States could generate an additional 240 billion barrels (38 km3) of recoverable oil resources. Developing this potential would depend on the availability of commercial CO2 in large volumes, which could be made possible by widespread use of carbon capture and storage. For comparison, the total undeveloped US domestic oil resources still in the ground total more than 1 trillion barrels (160 km3), most of it remaining unrecoverable. The DOE estimates that if the EOR potential were to be fully realised, State and local treasuries would gain $280 billion in revenues from future royalties, severance taxes, and state income taxes on oil production, aside from other economic benefits.

      From March 6, 2012 Wall Street Journal:
      http://online.wsj.com/ad/article/ceraweek2012-frontier

      Is Linn forecasting a time when fracking will be either outlawed, or too expensive to use?

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