Rice acquires Marcellus acreage from CHK for $336M
Rice Energy Inc. has signed a definitive purchase and sale agreement to acquire approximately 22,000 net acres and 12 developed Marcellus wells in western Greene County, Pennsylvania, from Chesapeake Appalachia, LLC and its partners for approximately $336 million. The sale of the non-core Marcellus acreage is a positive for Chesapeake, noted analysts with Global Hunter Securities following the announcement. The analysts say selling production at $16.8K/flowing Mcfepd when the c-corp is valued at $9.2K/Mcfepd "is the right move at this juncture…and one that potentially represents just the tip of CHK's SW Marcellus iceberg (22K net acres is less than 10% of CHK's 250K+ acre position in the play)." The analysts have been expecting a move by the company in the Marcellus, noting this deal with Rice Energy "backs up management's claims that its position is worth $4B (using today's sale metrics CHK's SW Marcellus assets are pegged at >$4.5B given 330 MMcfepd of production)." For Rice, the deal equates to a 24% increase in the company's net acreage position as of March 31, 2014 and the approximately 152 net risked locations represents a 47% increase in Marcellus inventory of net risked locations. Rice expects to commence pad-drilling by 2H15. Rice intends to fund the acquisition through a combination of cash on hand, and borrowings under its revolving credit facility. The company will also evaluate the equity capital markets. The deal is expected to close in August 2014.
Devon Energy sells $2.3B in US non-core assets to LINN
As planned, Devon Energy Corp. has agreed to sell all of its non-core US oil and gas properties to Linn Energy for $2.3 billion, or approximately $1.8 billion after tax. Proceeds of approximately $6,500 per flowing mcfe is roughly in-line with past gas deals and just over 5x 2013 EBITDA, according to calculations by Jefferies. The agreement covers Devon's remaining assets targeted for divestiture and includes properties in the Rockies, onshore Gulf Coast, and Mid-Continent regions of the US. "Devon is now concentrated in some of the most attractive North America resource plays, with liquids expected to approach 60% of our production by year-end and multi-year oil production growth projected to be in excess of 20%," said John Richels, president and CEO. "Upon completion of this transaction we will have reduced our net debt by more than $4 billion this year." Devon's production from these non-core US assets is currently 275 million cubic feet of gas equivalent per day, of which approximately 80% is natural gas (1Q production split was 150 MMcfe/d Rockies (71% gas), 102 MMcfe/d Gulf Coast (86% gas), and 42 MMcfe/d Mid-Con (77% gas). At December 31, 2013, proved reserves associated with these properties amounted to 1.242 trillion cubic feet of gas equivalent. EBITDA accompanying these assets totaled $350 million in 2013. Jefferies LLC acted as lead financial advisor to Devon. Credit Suisse Securities (USA) LLC also acted as a financial advisor to Devon. Vinson & Elkins LLP acted as legal advisor to Devon. Analysts at Global Hunter Securities said Devon emerges as a "cleaner" and more streamlined company. "Pricing and metrics were better than expected as relatively stable production and the low decline nature of the asset going forward fits in well with an upstream MLP like LINE/LNCO, resulting in a "win win" transaction for the buyer as well as the seller," they said, before noting that the deal "allows the company to streamline its portfolio and focus exclusively on its remaining five core assets: Eagle Ford, Permian, Canada, Cana and Barnett."
OWL partners with NGP
The management team of Oilfield Water Logistics LLC (OWL) has partnered with NGP Natural Resources X LP and NGP Energy Technology Partners II LP as equity sponsors. OWL is a new company formed to acquire, develop, and manage water-related and other oilfield fluids infrastructure and services in the energy industry. In May, OWL acquired an initial portfolio of saltwater disposal wells and entered into exclusive surface use agreements in New Mexico to serve oil and gas producers in the Permian Basin, where OWL is actively seeking additional investment and acquisition opportunities. NGP Natural Resources X LP is the most recent active fund of Natural Gas Partners (NGP). Founded in 1988, NGP is a $10.5 billion family of private equity investment funds organized to make investments in the natural resources sector. NGP is part of the investment platform of NGP Energy Capital Management. NGP Energy Technology Partners II LP, managed by NGP Energy Technology Partners (NGP ETP), invests in companies that provide products and services to the oil and gas, power, environmental, energy efficiency and alternative energy sectors.
Warren Resources to buy $352.5M in Marcellus assets from Citrus Energy
Warren Resources Inc. has executed a purchase and sale agreement to acquire essentially all of the Marcellus assets of Citrus Energy Corp. and two additional working interest owners for $352.5 million. As part of the total consideration, Warren will issue $40 million in Warren common stock priced at $6.00 per share, with the remainder to be funded through fully committed debt financing. This acquisition provides Warren with a substantial new basin platform in the prolific Marcellus Shale and adds a new core area to Warren's existing California oil and Wyoming natural gas assets. The assets are currently producing approximately 82 million net cubic feet per day of natural gas, as of June 2014. Estimated net proved reserves, as of the July 1, 2014 economic effective date, totaled approximately 208.3 billion cubic feet, 55% proved developed, as estimated by Netherland, Sewell & Associates Inc., Warren's independent petroleum engineering firm. President and co-founder of Citrus, Lance Peterson, will join Warren's board of directors upon closing of the acquisition. Citrus' key technical, operating, and land personnel will transition to Warren employees, including Zachary Waite, who will assume the role of vice president of business development and Marcellus Operations, and Daniel Collins, who will assume the role of vice president of Marcellus Land. To finance the purchase, Warren has obtained committed financing from Bank of Montreal and its affiliates, including an increase in its senior secured credit facility from $300 million to $750 million, along with an increase in the borrowing base from $175 million to $225 million in conjunction with the acquisition. Bank of Montreal and BMO Capital Markets have provided the company a commitment for $250 million in the form of a senior unsecured bridge loan, which is expected to remain unutilized. BMO Capital Markets served as financial advisor and Thompson & Knight LLP served as legal advisor to Warren. Jefferies LLC served as financial advisor and Vinson & Elkins LLP served as legal advisor to Citrus.
Hogan Lovells combines with BSTL
Global legal practice Hogan Lovells has agreed to combine with Mexican firm Barrera, Siqueiros y Torres Landa (BSTL), giving Hogan Lovells expanded capabilities in Mexico City and Monterrey. Upon completion, Hogan Lovells will begin operating in Mexico as Hogan Lovells BSTL, as part of its Americas region. As Hogan Lovells BSTL, the Mexico City and Monterrey offices will comprise about 70 lawyers, including 16 partners, and will focus primarily on corporate, commercial, litigation and arbitration, energy, real estate, telecoms and media, and transportation work.
Rockwater Energy Solutions purchases NeoHydro
Houston-based Rockwater Energy Solutions Inc., a water management and environmental solutions provider to the oilfield industry, has purchased Neohydro Corp., a provider of water treatment technology. As part of the agreement, Rockwater has obtained ownership of the patent-pending Neohydro Pathocell technology, a form of electro-oxidation. The company notes the technology can reduce bacteria by over 99%, reduce total suspended solids by over 99%, reduce total petroleum hydrocarbons by 99%, and reduce heavy metals by 40–90% (including strontium, barium, and iron), yielding a clean brine suitable for reuse in hydraulic fracturing.
Hawkwood enters East Texas with acquisition
Hawkwood Energy LLC has acquired producing and non-producing assets in Brazos, Leon, Madison, and Robertson counties, Texas. The assets lie in the Eagle Ford and Woodbine plays in East Texas. Hawkwood's entry into the area is the result of two separate transactions: the purchase of Crimson Energy Partners III's assets located mostly in Brazos County and the purchase of certain Encana Oil and Gas (USA) Inc. assets located mostly in Robertson County. The combined transactions include 1,800 barrels of oil per day of current production and more than 50,000 generally contiguous net undeveloped acres.
Nabors to merge businesses with C&J Energy Services
Nabors Industries Ltd. has agreed to combine its completion and production services businesses in the US and Canada with C&J Energy Services Inc., an independent oilfield services and manufacturing company. Following completion, Nabors will own approximately 53% of the combined company, which will be incorporated in Bermuda. In addition to the 62.54 million shares of the combined company, Nabors will receive $937 million cash, to be paid from proceeds of a public debt placement by the combined company. The new C&J Energy Services Ltd. will be managed by the current C&J Energy Services management team, supplemented by Nabors' completion and production services workforce. The transaction will roughly triple the C&J stimulation fleet, which should then rank as the fifth largest fleet in North America. The combined company will also operate the largest fluids management fleet and the second largest workover/well-servicing fleet in North America. Goldman, Sachs & Co. and Lazard Ltd. advised Nabors on the transaction. Citigroup and Tudor, Pickering, Holt, & Co. represented C&J Energy Services. "C&J contributes businesses that generated $175MM in LTM EBITDA in exchange for 47% equity while Nabors contributes businesses that generated $322MM in exchange for 53% equity and $940MM in cash. The $2.86B value for the Nabors assets equates to 6.2x EV to our 2015 EBITDA," noted analysts at Cowen and Company.
Stone Energy to sell non-core GOM shelf properties
Stone Energy Corp. has a definitive agreement to sell its non-core Gulf of Mexico (GOM) conventional shelf properties to Talos Energy Offshore LLC for $200 million in cash and assumed future undiscounted abandonment liabilities estimated at $117 million. These properties represented production volumes of 57 MMcfe per day for the first quarter of 2014 (58% natural gas). The estimated proved reserves associated with these properties represented 9% of Stone's year-end 2013 estimated proved reserves. Stone will retain an option for a 50% working interest in the deep drilling rights on the properties. Scotia Waterous acted as the financial advisor to Stone on the transaction. Following the news, Global Hunter Securities analysts stated, "The sale does not come as a surprise as SGY has been marketing the properties for some time now and it divested other non-core assets earlier this year. Going forward, SGY should have a more streamlined portfolio with the company focusing capital in the deepwater GOM and Appalachian Basin (Marcellus and Utica)."
