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In a bid for more U.S. oil production, Exxon Mobil Corp. XOM +1.05% agreed to buy Denbury Resources Inc.’s DNR +3.71% assets in the Bakken Shale for $1.6 billion in cash and interests in two oil fields.

The deal gives Exxon 50% more acreage in the Bakken Shale, an emerging oil field that this year helped make North Dakota the second-largest oil-producing state in the country, after Texas.

It also gives Exxon, the country’s largest natural-gas producer, the opportunity to place more chips on unconventional oil; the company has been criticized for betting too much on natural gas, which is much less profitable than oil amid the natural-gas market glut unleashed by hydraulic fracturing.

“It is no surprise” that Exxon, the world’s largest publicly traded oil company, continues to “attempt to scale up its presence in tight oil and liquids rich unconventional plays,” said analysts with Simmons & Co. in a research note. The analysts added that after the purchase the Bakken will become Irving, Texas-based Exxon’s largest unconventional-oil-rich play after Canada’s oil sands.

The agreement comes amid increased interest by international oil companies, which for years have struggled to grow, in so-called tight oil, which can be freed from shale rock formations with hydraulic fracturing, or “fracking,” technology. Production in these tight oil fields can be boosted quickly when enough capital is invested—a perfect fit for big oil companies with deep pockets and a mandate to extract more oil. Last week Royal Dutch Shell RDSA -1.02% PLC bought unconventional oil assets from Chesapeake Energy Corp. CHK -0.91% for $1.94 billion.

Exxon is buying 196,000 net acres of land in North Dakota and Montana, the entirety of Denbury’s assets in the Bakken, and is giving Denbury in return its interests in the Hartzog Draw field in Wyoming and the Webster field in Texas, plus the cash.

The assets Exxon is acquiring from Denbury are expected to produce 15,000 barrels of oil equivalent per day in the second half of 2012. The net production from the interests Exxon is transferring to Denbury amounts to 3,600 barrels of oil equivalent per day.

Denbury said it also agreed in principle to either purchase an interest in the carbon-dioxide reserves in Exxon Mobil’s LaBarge Field in southwestern Wyoming or to purchase incremental carbon dioxide from that field. Carbon dioxide is often used by oil companies to increase the amount of oil they can get from aging fields, a technique known as enhanced oil recovery.

The amount of cash Denbury receives will be reduced with the purchase of an interest in carbon-dioxide reserves. The deal is expected to close in the fourth quarter. For Denbury, the Bakken was “not a core focus,” said Jason Wangler, an analyst with Wunderlich Securities, Inc. Now it can focus on its specialty, which is enhanced oil recovery, Mr. Wangler added.

Denbury plans to use the cash proceeds to purchase additional oil fields in the Gulf Coast or Rocky Mountain regions, for capital expenditures and to repay debt.

Denbury also plans to resume its stock-repurchase program, under which about $305 million of the $500 million authorized in October 2011 remains.

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A survey by the Fraser Institute has ranked Louisiana as the 15th-best place in the world and 10th-best place in the United States to make oil and gas investments among 147 jurisdictions evaluated.

Experts said Louisiana can do better.

“We have to continue creating a positive atmosphere that will attract the oil and gas industry and not deter it,” Louisiana Oil and Gas Association President Don Briggs said. “This happens when individual parishes on up to the federal government realize that increasing government oversight is not the answer.”

The Fraser Institute’s sixth annual survey studied investment barriers, including higher taxes, the cost of regulatory compliance, uncertainty over environmental regulations and other existing regulations, quality of infrastructure, labor availability and skills, disputed land claims and the legal system.

Oklahoma, Mississippi and Texas were named the top three places, not only in this country, but in the world, to make oil investments. Their taxation regime, environmental regulations, clarity over protected areas, cost of regulatory compliance and legal system were more attractive than Louisiana’s, according to the survey.

“So many factors fall into play when looking at the overall picture of an industry like oil and gas,” Briggs said. “However, the litigious climate in Louisiana is stifling to the industry.”

According to a recent survey from the U.S. Chamber of Commerce, Louisiana is ranked 49 out of 50 for its legal climate. That same survey ranked Louisiana second out of 50 for tax climate for new firms — a picture different from the one painted by Fraser.

“The industry has been faced with these so called ‘legacy lawsuits’ where the idea is to litigate first, then regulate,” Briggs said. “This is a direct hindrance to those wanting to invest in the industry. Other factors such as taxes, regulations and politics also play a role in effecting the oil and gas industry.”

The survey noted that Louisiana’s labor availability and skills are the most attractive in the world. It also placed the state’s political stability and fiscal terms as encouragements to investment. Infrastructure, labor regulations and trade barriers were in the middle of the pack.

Louisiana has hovered around No. 15 in the survey over the past four years, but the state and area has continued to attract oil and gas companies. Lafayette Economic Development Authority Director Gregg Gothreaux used Halliburton’s new manufacturing facility as an example of growth.

“It was a competition to bring Halliburton here, and the competition was against other communities in Texas and in other places and that competition was won by Lafayette and the state of Louisiana,” Gothreaux said. “And a great part of it was that they knew that doing business in Lafayette, La., from the experience from other divisions, is beneficial to their bottom line.”

Briggs pointed to Haynesville Shale as an indicator of Louisiana’s prosperity. Haynesville Shale has been the No. 1 producing natural gas field in America for the last four years.

“Around 80 percent of the nation’s offshore oil and gas resources come from or through Louisiana. This is equal to nearly 30 percent of the entire energy consumption for the United States moving along the highways of Louisiana,” Briggs said.

“Looking at these statistics alone, Louisiana is the key player in oil and gas for our country.”

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“I never heard of this group until today,” Bureau of Safety and Environment Enforcement field officer Jason Mathews said. He was preparing to introduce new federal workplace safety standards to members of the South Central Industrial Association and that organization’s corporate guests, just as he has done with other assemblies connected to the offshore oil and gas business.

Mathews’ comment did not seem to concern the more than 150 people who attended a Safety and Environmental Management Systems seminar hosted by the SCIA, along with the Louisiana Oil and Gas Association, last Tuesday in Houma.

“That doesn’t surprise me,” SCIA Executive Director Jane Arnette said. “We are a regional organization, but having an event like this only goes to show how we serve our region.”

“As two groups that have a membership active in the industry this is a significant event,” LOGA Marketing Director Ben Broussard said. “When we can come together and host something so vital as safety, it only goes to show how important it is.”

“Education is part of what we do,” SCIA Executive Vice President and Rig-Chem President Lori Davis said. “So I think it is important to ensure the companies that fall under SEMS training and qualifying requirements understand what the industry wants, what our clients want and how to ensure you bring that back to your companies. To do everything properly and incorporate safety into everyday activities.”

SEMS is run by BSEE through the Bureau of Ocean Energy Management, Regulation and Enforcement. SEMS workshops involve discussion on regulatory requirements for companies developing and implementing oil and gas operations on the outer continental shelf.

The workshop was designed to provide an overview and background of the latest rules oil and gas-related professionals and their contractors are expected to be in compliance with by November 2013.

The SEMS seminar featured not only government spokesmen, but a panel of oil industry experts including Apache Oil managers Wade Broussard, David Dugas and Joel Plauche along with Chevron SEMS Core Team leader Ajay Shah.

Presentations on quality assurance and regulatory issues were also made by SEACOR manager Andre Allemand.

Michelle Martinez with the Louisiana Workforce Commission offered attendees a list of resources to finance SEMS training, which can run in excess of $2,000 per person each year.

“We have always had guidelines we had to work under for master service agreements,” Davis said. “Since [the April 2010] Macondo blowout we have seen an insurgence of more safety, checks and balances, to make sure what we are doing today meets standards while increasing awareness. SEMS is simply a way to incorporate safety standards.”

Broussard said that companies are paying attention to federal regulations and realize how it impacts their business in general. “We are out here to put in a hard day’s work, an honest day’s work and a safe days work,” he said. “To be able to continually educate these guys about what it is to be safe and in compliance helps them better supply their customers and return to their families.”

“For a small business, the SEMS certification is a substantial cost,” Davis said, “but what is the cost of safety? We are creating awareness to the fact that SEMS is important to the operators as well as the service industry. We are bringing this forward to give people an opportunity to learn.”

MMR Group Safety Coordinator Scott Hubbard said he came to see what the SCIA and LOGA SEMS workshop offered and how it fit into his company’s existing safety program. “All the changes and new requirements make safety a dynamic discipline,” he said. “It is not static anymore because things change so fast.”

“I have yet to meet a person who wants to go offshore and risk returning,” Mathews said.

HSE Consultant Philip Pearson was the day’s first speaker. He introduced SEMS to workshop attendees, but offered in his statements what many considered the bottom line. “It is the operator’s responsibility to make sure [workers] are trained before they go on site,” he said.

Pearson said SEMS simply involves hazard analysis, management procedures, training, documentation and safe working practices.

“Safety has always been an important part of the industry’s practice,” Davis said. “Who can afford to have a lost time accident? Who can afford a near miss? No one. Any time these things happen they affect us from an insurability standpoint and also an operating standpoint. We have to train employee safety. The problem we have today is finding skilled and trained workers to do the job in the industry because it is a difficult task.”

Arnette credited Davis and the SCIA Industrial Committee on Education for bringing SEMS compliance to the forefront for regional industry leaders.

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This month is on track to have the highest gasoline prices ever seen in September, with AAA saying the average national price per gallon jumped 14 cents over the last month and bucked the trend of lower prices after Labor Day.

While paying a national average of $3.86 Monday for a gallon of regular unleaded gasoline — up from $3.83 last week and $3.72 a month ago, according to AAA — might slow the already-weak U.S. economy, it could benefit the local economy, experts said.

The oil and gas industry is among Lafayette’s major economic drivers, and likely the most important, UL geology and petroleum engineering professor Gary Kinsland said.

“I think the petroleum industry is at the top of that list dollarwise, so anything that helps the petroleum industry helps Lafayette tremendously,” Kinsland said.

Locals who have stocks in oil companies benefit when prices are high, Kinsland said, and work often increases.

“When oil prices are high, yes, it does benefit our industry in that it will create more exploration and drilling,” Louisiana Oil and Gas Association President Don Briggs said. Oil was $99 a barrel Monday and briefly hit $100 a barrel Friday.

According to oil service company Schlumberger Limited, 1,856 rigs were in the Gulf of Mexico on Friday, compared to 1,835 last week and 1,838 a year ago.

Those who question the positive economic impact of higher gas prices should look to the 1980s, when oil prices decreased significantly and hit Lafayette’s economy hard, Kinsland said.

The average price of gasoline in September over the previous five years is $3.07 a gallon.

Kinsland remembers having a conversation with a pizza delivery person who complained about the price of gas, and Kinsland told his he should not be upset over the price because it could increase disposable incomes and drive more people to order a pizza.

“High gas prices are generally good for Lafayette, but people want the economic benefit that comes with high gas prices and don’t want to pay for higher prices,” he said.

In Lafayette on Monday, the average price for a gallon of gasoline was $3.67, up from $3.65 last week and $3.55 a week ago, according to AAA Fuel Gauge Report.

That increase followed a jump of 50 cents in 60 days from early July through the end of August. AAA blamed refinery and supply problems, as well as Hurricane Issac.

Gas prices increased from the Gulf Coast to the Midwest to begin September as markets prepared for possible supply and distribution disruptions from Isaac, according to AAA. However, as concern over the lasting impact of the storm has diminished and Gulf Coast refineries have successfully restarted production.

Any lingering effects from Issac are now gone, Briggs said, who added that global supply and demand issues and unrest in the Middle East likely have pushed up oil prices.

“There is so much turmoil there that it’s a very slippery slope with delays and disruptions with the oil companies,” Briggs said, adding that 55 percent of oil used in the U.S. is imported.

Additionally the Federal Reserve last week took steps to boost economic growth, but those stimulus measures — spending $40 billion a month to buy mortgage bonds to make home buying more affordable and pledging to keep short-term interest rates near zero until mid-2015 — pushed up oil prices and could fuel inflation.

The Fed’s move can push up oil prices in several ways, according to the Associated Press. The Fed creates new money to pay for its mortgage bond purchases. That increases the amount of dollars in circulation and can lower their value. Oil is priced in dollars, so the price tends to rise when the dollar falls. That’s because it costs more for overseas investors to purchase dollars to buy oil.

Still, AAA expects the national average to decline in the coming months as demand drops off following the busy summer driving period, as refineries switch from summer-blend to less expensive winter-blend gasoline and as hurricane season draws to a close.

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A year after oil companies began gobbling up leases in the Tuscaloosa Marine Shale, 19 wells are producing or under way, but some industry experts expect a big increase in drilling to hit next year.

Most of the leases are now over a year old, and oil and gas companies typically sign three-year leases with options for two-year extensions, said Kirk Barrell, president of Amelia Resourcess LLC in The Woodlands, Texas.

“I think this play has to accelerate drastically next year,” Barrell said.

Barrell said it’s an exciting time in the Tuscaloosa, a shale formation that stretches across the middle of Louisiana and is being targeted for oil production.

There’s a basket of good operators, and they’re getting some good wells, Barrell said.

For example, two of Encana Corp.’s most recent wells had 30-day initial daily production rates of 933 barrels and 1,072 barrels.

“I would say we’re very pleased with the reservoir performance. As a matter of fact, I’m excited about the reservoir performance,” Eric Marsh, executive vice president and senior vice president of Encana USA Division, said during the Barclay’s CEO/Power Conference on Sept. 6.

Encana has 355,000 acres leased in the Tuscaloosa with an estimated 9.4 billion barrels of oil, Marsh said. The company has around 1,250 well sites, has drilled and completed five wells, and plans to drill seven more this year.

The Tuscaloosa has a couple of things in its favor, Marsh said. There is a significant amount of infrastructure in place, and the oil itself, Louisiana Light Sweet crude, can fetch $15 or more per barrel than the benchmark crude, West Texas Intermediate.

In the last year, the premium for a barrel of Louisiana Light Sweet has ranged from $8.50 to as much as $29.75, according to Bloomberg. This week the price for Louisiana Light Sweet was more than $17 higher than the benchmark West Texas Intermediate price, which has been in the $95 to $97 range in September.

Encana has said its target estimate for its Tuscaloosa Marine Shale wells’ potential production, also known as estimated ultimate recovery, is the equivalent of 730,000 barrels of oil per well (worth around $83.2 million at this week’s prices).

Encana has “a reasonably high confidence level” that it will achieve its target recoveries, spokesman Doug Hock said.

Halcón Resources Chief Executive Officer Floyd Williams, who also spoke at the Barclays conference, said he expects wells in the formation to produce the equivalent of 600,000 to 700,000 barrels per well.

Halcón began leasing around six or seven months ago and expects to lease 100,000 to 150,000 acres, Williams said. The company has around 60,000 acres under lease, and the price has jumped from $250 an acre to around $1,000.

With those kind of production results expected, local officials have begun scrambling to prepare residents to nab some of the expected job bonanza when the shale booms.

“We do have a good feeling about the oilfield shale over here in this parish,” said Dennis Manshack, West Feliciana Parish director of economic development. “The well that they (Devon Energy) did complete is almost 500 barrels a day with a tight choke on it.”

The well’s daily production could actually be two or three times that amount, Manshack said. Drilling companies often restrict the flow during initial production, but let the well flow more rapidly once full production begins.

Manshack said he has done some preliminary reviews of what happened in the Haynesville Shale in northwest Louisiana and the Marcellus Shale in Pennsylvania.

Drilling activity in those shale formations, and others, led to big increases in the demand for skilled labor and services, such as housing, for those workers.

With the proper training, residents of West Feliciana, East Feliciana and Pointe Coupee parishes could fill many of those jobs, Manshack said. The West Feliciana Police Jury and the Economic Development Board are working together now to plan for “the inevitable” boom.

However, Louisiana Oil and Gas Association spokesman Ragan Dickens, who has twice addressed West Feliciana officials, said it’s too early to tell whether the Tuscaloosa will be similar to the Haynvesville Shale, a natural gas-producer that triggered a drilling frenzy that helped drive down natural gas prices to a point where producers are favoring oil plays.

“The jury’s still out,” Dickens said of Tuscaloosa’s outlook.

“There’s definitely resources in the ground … but they’re still trying to figure out how to extract those.”

People in that area, and Dickens as well, hope the Tuscaloosa will bring the same kind of economic impact that the Haynvesville did, Dickens said. There are lots of positive signs — eight of the biggest players in natural gas have leased acreage in the Tuscaloosa — but it’s impossible to say what will happen.

West Feliciana officials have already met with representatives of Council Development Corp.’s Morgan City location and Baton Rouge Community College.

Council Development is owned by PEC Premier Safety Management Training and provides accelerated training for onshore and offshore oilfield workers, Manshack said. A nine-day course can prepare workers for an entry-level job in the oilfield.

The community college is designing a number of courses for the parish that will help residents and students gain welding, electrical/instrumentation and carpentry skills, Manshack said. Those skills can help residents get jobs in industry and the oil field.

“These courses cost. The Police Jury’s not going to be able to foot the whole bill,” Manshack said. “But we need to train some people so we can get some of those people in the industry, to make them productive.”

The nine-day course is around $3,000, Manshack said.

West Feliciana has little in the way of economic development funding, he said. But with the kind of potential the Tuscaloosa Marine Shale offers, local officials can try to get help from state legislators and officials, as well as private industry.

Manshack said West Feliciana hopes to be able to have the training programs in place in January.

Dickens said sitting down with the oil and gas industry, as Caddo and Bossier parishes did, to talk about things like roads, permitting and the environment, is a good idea.

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It has been over a year now now since oil companies began gobbling up leases in the Tuscaloosa Marine Shale in Avoyelles, and already three wells are under way. Some industry experts expect a big increase in drilling to hit next year

Halcón Resources Chief Executive Officer Floyd Williams, who spoke at the Barclay’s CEO/Power Conference on Sept. 6, said he expects wells in the formation to produce the equivalent of 600,000 to 700,000 barrels per well.

Halcón began leasing last May in Avoyelles and expects to lease 100,000 to 150,000 acres total in several parishes, Williams said. The company has around 60,000 acres under lease, and the price has jumped from $250 an acre to around $1,000 in some of the more promising areas. When Halcon entered the Avoyelles market offering $500 an acre with 25 percent royalties, other companies upped their offers of $300 to match.

Halcon recently began drilling its first well in Poland, just west of Avoyelles Parish. EOG has already begun drilling the first Tuscaloosa Horizontal wells in Avoyelles, one at Brouillette and one at Hamburg. Both companies are out of Texas. Halcon is Spanish for “hawk”, which is somewhat of a spinoff to the successful oil drilling company Petrohawk which shares founders.

Eight of the biggest players in natural gas have leased acreage in the Tuscaloosa, at least two of them in Avoyelles— but it’s impossible to say what will happen as the exploration companies test wells to attempt to pull oil from difficult and never tapped before resources under Avoyelles.

Most of the leases are now over a year old, and oil and gas companies typically sign three-year leases with options for two-year extensions, said Kirk Barrell, president of Amelia Resourcess LLC in The Woodlands, Texas.

“I think this play has to accelerate drastically next year,” Barrell said at.

Barrell said it’s an exciting time in the Tuscaloosa, a shale formation that stretches across the middle of Louisiana and is being targeted for oil production.

Some hope the Tuscaloosa will be like the Haynesville Shale in northwest Louisiana and the Marcellus Shale in Pennsylvania.

Drilling activity in those shale formations, and others, led to big increases in the demand for skilled labor and services, such as housing, for those workers.

However, Louisiana Oil and Gas Association spokesman Ragan Dickens, who has twice addressed West Feliciana officials, said it’s too early to tell whether the Tuscaloosa will be similar to the Haynvesville Shale, a natural gas-producer that triggered a drilling frenzy that helped drive down natural gas prices to a point where producers are favoring oil plays.

“The jury’s still out,” Dickens said of Tuscaloosa’s outlook.

“There’s definitely resources in the ground … but they’re still trying to figure out how to extract those.”

People in that area, and Dickens as well, hope the Tuscaloosa will bring the same kind of economic impact that the Haynvesville did, Dickens said.

In West Feliciana officials have already met with representatives of Council Development Corp.’s Morgan City location and Baton Rouge Community College to offer training a nine-day course to prepare local workers for an entry-level job in the oilfield.

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