Friday, March 30, 2012

Nabors looks at Alaska non-core sales, but not drilling business

—Kay Cashman
Petroleum News

Nabors Industries is getting back to basics, putting its oil and gas properties and non-core assets up for sale in order to concentrate on two aspects of its business — drilling and rig services and completion and production services.

Nabors Alaska Drilling is not on the chopping block because it’s part of the core asset group its parent intends to preserve and grow.

In Alaska, as well as elsewhere in the world, Nabors says “getting back to the basics” will likely mean selling non-core assets such as Peak Oilfield Services, which specializes in rig moving, custom heavy hauling, crane and rigging services and oilfield transportation, as well as marketing its interest in the Brooks Range Petroleum Corp.-operated oil and gas leases on the North Slope that Nabors-owned Ramshorn shares with Alaska Venture Capital Group, or AVCG.

The streamlining and restructuring comes amid a change in leadership, from Gene Isenberg to Anthony G. Petrello, at Nabors Industries.

Petrello was named chief executive officer of Nabors Industries in October, taking the reins from Isenberg, who remains chairman until June. Petrello, a lawyer who joined the Nabors board in 1991, also carries the titles of deputy chairman and president.

In a March 26 presentation at a Howard Weil conference in New Orleans, Petrello said Nabors is in the process of selling oil and gas properties in Alaska, Colombia and the Eagle Ford shale in south Texas, and should complete those deals in the second half of this year.

Nabors expects those sales to yield between $300 million and $400 million.

It also plans to sell oil and gas properties in British Columbia, including the Horn River and Montney shale plays, as well as its stake in oil and gas producer NFR Energy and Peak Oilfield Service, at a total value of $300-$400 million.

The company’s March 26 SEC filing of those presentation materials says in consolidating into just two divisions, Nabors will migrate away from the business unit structure; consolidate regional operations management; establish customer account managers; consolidate operational, technical and corporate support functions.

Nabors CDR-2 rig in Alaska

Petrello’s presentation materials say that one of the priorities of Nabors’ drilling and rig services unit will be specialized rigs that deliver a “unique niche, proprietary technology, technical leadership” and “strong market positions.”
The drawing accompanying the specialized rig section is none other than Nabors Alaska’s CDR-2, which the company delivered to ConocoPhillips nearly three years ago at the Kuparuk River unit. It is the first purpose-built coiled tubing rig designed for the Arctic.

Peak, Ramshorn sales not certain

The sale of Peak and Ramshorn’s North Slope lease interests are not done deals, Nabors Director of Corporate Development Denny Smith told Petroleum News March 27.

“We’re exploring the sale of Peak, have hired an investment bank to do the work on it, so it’s not a sure deal, there is no definite decision to sell. We’re going to evaluate it first; we’re 30 days away from starting the initial process,” he said.

In regard to the North Slope acreage it shares with AVCG, Smith said Nabors is exploring the possibility of a sale, but a sale will “depend on what we think the value is.”

Production tax deterrent to development

In another one of Petrello’s presentation slides, “Looking Ahead: What Contributes to Our Optimism,” Alaska is noticeably absent.

When asked why, Smith said although there is a favorable outlook for Cook Inlet drilling and development activity, Alaska’s production tax is a deterrent to development and production on the North Slope.

“We see a lot of pent up demand on the North Slope pending modifications to ACES,” he said, referring to the state’s production tax, Alaska’s Clear and Equitable Share.

Divestures yield $1 billion-plus

Petrello’s presentation materials say Nabors is also “evaluating” the sale of five jack-up rigs stationed in the U.S. Gulf of Mexico, five barge rigs in the U.S. Gulf, and eight jack-up rigs located in international waters, the value of all of which has yet to be determined.

According to a March 26 Dow Jones article, analysts with investment bank Dahlman Rose & Co. said in a research note that Nabors divestitures “should bring in comfortably over $1 billion by the end of the year with more to come in 2013.”

Dow Jones reported that while Nabors is selling its oil properties now, analysts say the company will likely wait until market conditions improve before selling its natural gas properties.

Nabors, which is registered in Bermuda but has operational headquarters in Houston, owns the world’s largest fleet of land rigs, currently pegged at 1,200 land rigs and 50 offshore units.