Independents Finding World Niches

APPEX Dealmakers to Hear Tips

Today, you can travel the world over and find U.S. independents putting wells down in darned near every hydrocarbon province, right alongside their big brethren.

Nimble on their feet and armed with all the latest industry technology, even the smallest companies are staking claims in places that were long the exclusive playground of the majors for the most part, e.g., Russia, the deepwater Gulf of Mexico (GOM), the North Sea, etc. -- and doing quite well, thank you.

For example, take ATP Oil & Gas, which operates wholly offshore.

Since its inception in 1991, the company has steadily built a track record for successful project development and operational prowess in the GOM in water depths as great as 1,360 feet, using the latest 'n' greatest tools from the available industry toolbox. In fact, it is widely recognized for its expertise using subsea technology, according to Paul Bulmahn, chairman and president of ATP.

Recently, opportunity knocked from far away when the British government came calling to seek ATP's involvement in select projects in the North Sea.

Since that contact occurred, the company has secured properties having approximately 81 Bcfe proved reserves in the Southern Gas Basin of the North Sea. This is an area protected by Great Britain and the continent, having water depths between 50 and 190 feet with infrastructure already in place -- not so different from ATP's GOM home base.

Please log in to read the full article

Today, you can travel the world over and find U.S. independents putting wells down in darned near every hydrocarbon province, right alongside their big brethren.

Nimble on their feet and armed with all the latest industry technology, even the smallest companies are staking claims in places that were long the exclusive playground of the majors for the most part, e.g., Russia, the deepwater Gulf of Mexico (GOM), the North Sea, etc. -- and doing quite well, thank you.

For example, take ATP Oil & Gas, which operates wholly offshore.

Since its inception in 1991, the company has steadily built a track record for successful project development and operational prowess in the GOM in water depths as great as 1,360 feet, using the latest 'n' greatest tools from the available industry toolbox. In fact, it is widely recognized for its expertise using subsea technology, according to Paul Bulmahn, chairman and president of ATP.

Recently, opportunity knocked from far away when the British government came calling to seek ATP's involvement in select projects in the North Sea.

Since that contact occurred, the company has secured properties having approximately 81 Bcfe proved reserves in the Southern Gas Basin of the North Sea. This is an area protected by Great Britain and the continent, having water depths between 50 and 190 feet with infrastructure already in place -- not so different from ATP's GOM home base.

The company's first North Sea project is under development, with production anticipated to commence in 2003.

ATP's foray into this region is all part of a very focused strategy of this company that shuns exploration in favor of another approach that historically has served it well.

"We take on PUDs (proved undeveloped reserves) and develop them," Bulmahn said, "so an area must have proved reserves or we're not interested.

"The more than 300 projects the British government has identified that fit into our niche are properties that were drilled by exploration companies which have identified proved reserves," he said, " that the explorationists elected not to develop for whatever reason. We're simply moving our business strategy from a place we already know well to one with similar operating characteristics."

Other similarities exist between the two regions, including some aspects of the regulatory arena.

"The laws, rules and regulations are different," Bulmahn said, "but there's a willingness to work with independents in both locales.

"Here (in the U.S.), the MMS is one of the government agencies most understanding to the industry's needs," he said, "and the Department of Trade and Industry in the U.K. certainly is as well.

"Some talented people in the U.K. left industry to join the department," Bulmahn noted, "and they have a practical understanding of the industry and its problems."

Money Talks

Still, there are headache-inducing obstacles to surmount.

Not surprisingly, money ranks right up there on the list.

Whether we're talking the GOM or the North Sea, anything in the offshore requires serious capital to get the job done. But that magnitude of capital is becoming ever more difficult to acquire because some of the mezzanine lenders to the oil and gas folks have flat out disappeared, e.g., Enron Capital, while others are scaling back, and the new entrants needed are not yet forthcoming, according to Bulmahn.

To enable the independent companies increasingly to participate along with the majors in these hydrocarbon-rich regions, he said it's crucial to persuade the investment community in the GOM and North Sea that the independents are stronger than ever because of the advanced technology they're able to employ.

Capital requirements loom particularly large for North Sea activity, Bulmahn said, because project costs tend to be greater -- even office space is pricier.

Still, he offers a compelling reason to reach out beyond that time-tested workhorse: the GOM.

"In our niche in the North Sea, larger reservoirs have been left behind than in the Gulf of Mexico as non-strategic by the majors who drilled them, so we can justify our efforts to bring them to production.

"The majors need a higher return than the independents because of the greater overhead base they need to cover," Bulmahn continued, "so obviously, I'm willing to accept a smaller return than they are to make the production happen."

vctzaabtacwtzzqdtwce

You may also be interested in ...