Devon Energy Corp., Oklahoma City, projects drilling of 800 wells in 5 years on Barnett shale acreage it will acquire from privately owned Chief Holdings LLC for $2.2 billion in cash.
In a related transaction, Crosstex Energy LP, Dallas, plans to pay $480 million for Chief’s gas gathering pipelines and midstream assets in the Barnett shale producing region.
Other recently announced upstream transactions include:
• CNOOC Ltd. closed on its acquisition of a 45% interest in oil mining license (OML) 130 off Nigeria from South Atlantic Petroleum Ltd. (Sapetro) of Lagos (OGJ Online, Jan. 9, 2006).
• Petrohawk Energy Corp. and KCS Energy Inc. agreed to merge in a $1.6 billion cash and stock transaction. Upon closing, KCS stockholders will own 50% of the resulting Petrohawk. Both companies are based in Houston.
• Plains Exploration & Production Co. plans to acquire Stone Energy Corp., Lafayette, La., in a stock transaction worth $1.46 billion and the assumption of $483 million in debt.
• BASF AG and OAO Gazprom have agreed to make a series of swaps of gas production and marketing assets.
• Mitsui & Co. and its subsidiaries plan to buy 50% interest in Pogo Producing Co.’s oil and gas leases in the Gulf of Mexico for $500 million. Pogo and Mitsui also announced plans to jointly seek oil and gas acquisitions in the US and Canada.
• Pacific Stratus Energy Ltd., Toronto, agreed to pay $60.2 million to acquire 100% interest in Colombian oil assets owned by a subsidiary of Chile’s Empresa Nacional del Petroleo (ENAP).
• Oilex NL, Perth, has boosted its holdings in the Indian state of Gujarat by acquiring an additional 15% interest in Cambay gas field. The acquisition brings its interest to 45%.
• Husky Energy Inc., Calgary, acquired 23,680 acres of Alberta oil sands leases adjacent to its Saleski property near Fort McMurray at an April land sale for $10 million.
In service company news, Schlumberger Ltd. plans to pay $2.4 billion for Baker Hughes Inc.’s 30% minority share in WesternGeco, a seismic joint venture between the two companies.
Devon, Crosstex
Devon and Crosstex, which made their offers jointly to Chief, both expect to close their deals June 29.
Devon estimates the acquired properties include proved reserves of 617 bcf of gas equivalent and 169,000 net acres in leasehold.
J. Larry Nichols, Devon’s chairman and chief executive officer, said that after closing, Devon’s Barnett shale interests will cover 720,000 net acres.
As a result of the Chief acquisition, Devon expects to increase its 2006 capital budget for exploration and development expenditures by $125 million. Operating and general and administrative expenses will also increase modestly as a result of the acquisition, Devon said.
CNOOC
CNOOC said it paid $424 million in addition to the $2.268 billion that it initially agreed to pay. The adjustment involved financial, operating, and capital expenses before closing.
OML130 contains four discoveries and a range of prospects. Nigerian National Petroleum Corp. and the Chinese government, which is CNOOC’s majority owner, both approved the transaction.
A production-sharing agreement and a production-sharing contract (PSC) each governs a 50% interest in OML 130. Sapetro holds 100% interest in the PSC, of which CNOOC plans to acquire 90% interest, providing it with a 45% interest in OML 130.
Petrohawk, KCS Energy
On a pro forma basis, the combined Petrohawk and KCS Energy will have estimated proved reserves of 1 tcf of natural gas equivalent, of which 68% will be proved developed and 82% will be gas.
The companies together produce 291 MMcfd of gas equivalent. Elm Grove and Caspiana gas fields in northern Louisiana will be a core area. KCS stockholders will receive $9/share and 1.65 shares of Petrohawk stock for each share of KCS stock. This represents consideration to KCS stockholders of $31.41/share based on Petrohawk’s Apr. 20 closing price of $13.58/share.
Petrohawk said the price encompasses $450 million in addition to 84 million Petrohawk shares, not including KCS stock options that convert into Petrohawk options upon closing, which is expected in the third quarter.
Plains Exploration, Stone Energy
The boards of Plains Exploration and Stone Energy approved the merger agreement and agreed to recommend it to their stockholders for approval.
Closing is expected during the third quarter of 2006. After closing, Stone stockholders will own 30% of the combined company.
The combined company would have an estimated proved reserve base of 500 million boe, of which 80% is oil. Combined assets will be in California, the Gulf of Mexico, Rocky Mountains, and Texas with 207,643 net developed acres and 992,822 net undeveloped acres.
Plains plans to issue 34.5 million shares to Stone shareholders. Terms call for Stone shareholders to receive 1.25 shares of Plains stock for each share of Stone stock.
BASF, Gazprom
BASF plans to acquire 35% interest minus one share in OAO Severneftegazprom, which holds the development license for Yuzhno-Russkoye gas field in western Siberia.
The agreement came as Russian President Vladimir Putin met with German Chancellor Angela Merkel in Tomsk, Siberia. Detailed agreements are expected to be finalized by yearend.
Last year, BASF subsidiary Wintershall AG and Gazprom agreed to jointly develop Yuzhno-Russkoye field (OGJ, May 2, 2005, Newsletter).
The field has reserves of more than 600 billion cu m of gas, three times the holdings of Achimgaz, a Siberian joint venture that Gazprom and Wintershall formed to develop gas from the Achimov horizon of Urengoy field.
Gazprom will increase its interest in Wingas GMBH to 50% less one share from 35% now.
In addition, Gazprom will participate in a Wintershall subsidiary with interests in exploration and production activities in Libya.
In line with Gazprom’s increased stake, Wingas plans to focus on marketing gas in Germany. Gazprom and BASF also plan to participate with a 50% interest each in a new company, Wingas Europe.
BASF and Gazprom previously established the North European Gas Pipeline Co. joint venture, in which Gazprom has 51% interest and Wintershall has 24.5% interest. The company is to build the North European Gas Pipeline to transport Yuzhno Russkoye gas to Western Europe.
Last year, Wingas increased and extended its gas purchase contracts with Gazprom subsidiary OOO Gazexport through 2030, ensuring the sale of Russian gas to Germany and elsewhere in Western Europe.
Mitsui
Pogo expects to use proceeds from the Mitsui transaction to help finance its pending acquisition of Latigo Petroleum Inc. for $750 million (OGJ, Apr. 24, 2006, p. 38).
The Latigo acquisition involves Permian basin and Anadarko basin properties. Pogo said its strategy is to focus on US and Canadian onshore operations. The Houston company is keeping 50% interest in its Gulf of Mexico properties, which will then represent, after these two transactions, slightly more than 6% of Pogo’s total proved reserves.
The pending sale of 50% in Pogo’s Gulf of Mexico assets is equivalent to net production capacity, without any reduction due to continuing hurricane-related curtailments, of 8,000 b/d of oil and 24 MMcfd of gas.
Subject to customary conditions, Mitsui expects closing during June.
Pacific Stratus
Sipetrol SA, an ENAP subsidiary, has a 90.6% interest in the Dindal and Rio Seco Blocks, and a 27.27% interest in the Caguan Block where Guaduas and Rio Ceibas oil fields produce a total of 7,200 boe/d (3,000 boe/d net to Pacific Stratus).
Guaduas produces 18.5° gravity oil, and Rio Ceibas produces 22° gravity oil from upper sands and 23-32° gravity oil from basal sands. The transaction, subject to financing and regulatory approval, is expected to close in June.
Pacific Stratus Energy has interests in the Doima Block and Ortega-Pacande oil fields as well as in the La Creciente, Moriche, and Puli-B exploration blocks in Colombia.
Manfred Kruger, Pacific Status chairman, said the transaction transforms his company from an exploration company into a production company with exploration potential.
Oilex
In adding to increasing its stake in Cambay gas field, Oilex holds a 40% stake in each of the nearby Bhandut and Sabarmati gas fields.
The fields produce intermittently and at low rates from Tertiary-age reservoirs due to sand and water influx and declining reservoir pressure from formation damage.
Oilex believes the fields can be redeveloped.
Oilex will pay $5.39 million to cover the costs already incurred by farmout partner Gujarat State Petroleum Corp (GSPC) and GSPC’s former partner Niko Resources Ltd. The fields were discovered by India’s Oil & Natural Gas Corp. and acquired by GSPC in 1995.
Husky
Husky’s latest oil sands purchase will add 2.7 billion bbl of bitumen in place to existing holdings, increasing potential Saleski resources to about 19.5 billion bbl of original bitumen in place and consolidating total Husky leases in Saleski to 178,560 acres.
The Saleski lease potential is in the Grosmont carbonate formation and has on average 250 m of overburden. Husky completed a four-well evaluation program this winter on Saleski and plans to spend $25 million for resource evaluation wells at Saleski and at its Caribou Lake lease near Cold Lake.
Husky will spend a total of $230 million in 2006 on oil sands projects in Alberta, including $145 million finishing construction of its 30,000-b/d Tucker oil sands project near Cold Lake. Commissioning of Tucker facilities and steam injection is expected by mid-2006, with first oil production by yearend.
WesternGeco
Baker Hughes’s board approved the sale, which is expected to close by Apr. 30. Baker Hughes plans to use the net cash proceeds to repurchase stock.
WesternGeco was formed in mid-2000 through the combination of the seismic fleets, data processing assets, surveys, and other assets of Schlumberger’s Geco-Prakla unit with Baker Hughes’s Western Geophysical unit (OGJ, June 12, 2000, p. 28).
