Industry Briefs

LINN Energy to acquire East Texas assets for $175M

LINN Energy LLC has signed a purchase agreement to acquire properties in East Texas for $175 million. The acquisition will close on or before May 1, 2012, and will be financed with proceeds from borrowings under its revolving credit facility. The acreage includes approximately 24 MMcfe/d of production (97% natural gas); low decline rate of less than 10% and a reserve life of 15 years; proved reserves of approximately 136 Bcfe (100% PDP); approximately 430 wells on approximately 19,800 contiguous net acres; and multiple identified upside recompletion and infill-drilling opportunities.

Howard Energy to buy185 miles of Texas pipeline

Howard Energy Partners has entered into definitive agreements to acquire substantially all of Meritage Midstream Services' natural gas gathering assets in South Texas. HEP will acquire the Eagle Ford Escondido Gathering System, which is partially owned by Laredo Energy, and the Cuervo Creek Gathering System. Both systems are primarily 12- to 16-inch high pressure natural gas pipelines. The transaction is expected to close in April. It will be funded primarily with equity investments in HEP by Crosstex Energy LP, Quanta Services Inc., GE Energy Financial Services, and Clear Springs Energy Co. LLC. After closing and including initial investments, Crosstex and Quanta will have contributed an aggregate of $87.25 million each to HEP. Both companies, along with GE Energy Financial Services, will each own 30.6% of HEP's outstanding units. The two systems, in Webb County, Texas, consist of a newly constructed rich natural gas gathering system with approximately 83 miles of pipeline, a 102-mile lean natural gas gathering system, two leased amine treating plants, and multiple intrastate pipeline outlets for regional processing and transportation. The systems are supported by multiple long-term fee based agreements with more than 180,000 dedicated acres and more than 200 billion cubic feet of total volume commitments. The lean and rich gas pipelines have a combined capacity of 400 million cubic feet of natural gas per day (MMcf/d), of which 80% of the firm capacity is under contract. HEP expects to expand the systems to meet increased demand for natural gas gathering from multiple geologic formations, including the Escondido, Olmos, San Miguel, Austin Chalk and Eagle Ford Shale. Following the closing, HEP will own and operate approximately 450 miles of natural gas gathering pipelines in Webb, Dimmit, Frio, Maverick and Zavala counties in Texas. These systems currently gather more than 175 MMcf/d and have the ability to quickly expand capacity.

ArcLight Capital investsin midstream segment

Magnum Hunter Resources Corp. has agreed to sell 28% of its midstream segment, Eureka Hunter Holdings LLC, to an affiliate of energy investment firm ArcLight Capital Partners LLC for $100 million. Eureka Hunter is the holding company for Magnum Hunter's midstream operation, including the Eureka Hunter Pipeline in West Virginia and Ohio. Energy investment firm ArcLight, based in Boston, Mass., will also have the right to invest up to an additional $100 million of Preferred Units, based on certain terms and conditions, including the approval of Eureka Hunter, bringing the total potential investment to $200 million. The 28% ownership in the Eureka Hunter pipeline will be sold for $100mm of 8% convertible preferred units. According to estimates by Stifel Nicolaus analysts, the transaction implies a market value of nearly $360 million for the midstream segment, slightly higher than its $300 million estimate. Of the initial $100 million investment, approximately $60 million will be distributed to the parent, Magnum Hunter, and the remaining $40 million will be used to fund a pending acquisition. Additional investments will be used to develop Eureka Hunter's gathering system network in West Virginia; develop the company's expansion plans into the Utica Shale in Ohio; and fund other accretive midstream growth projects and/or acquisitions.

Marubeni, INCJ acquire Seajacks Intl

Japan's Marubeni Corp. and Innovation Network Corporation of Japan, a government-sponsored private equity corporation, have agreed to acquire Seajacks International from funds controlled by Riverstone Holdings LLC, an energy-focused private equity firm. The transaction was announced March 19, and the sale is expected to close at the end of April 2012. Seajacks International is an offshore services company that operates primarily in the European offshore wind market but also serves the European offshore oil and gas markets. Seajacks owns and manages self-propelled jack-up vessels equipped for the North Sea. Riverstone and the Seajacks' management team acquired Seajacks in January 2010 in a take-private transaction. Since then, Seajacks has expanded its operations throughout Europe and is in the process of adding vessels to its fleet. The next vessel is set to be delivered in May 2012.

Carrizo to sell Barnett Shale assets

Carrizo Oil & Gas Inc. has entered into a definitive agreement to sell a portion of its properties in the Barnett Shale to a subsidiary of Atlas Resource Partners for $190 million in cash. The sale, with an effective date of January 1, 2012, is expected to close in late April. Producing properties being sold include 221 gross (approx. 110 net) wells currently producing at an approximate net rate of 35 MMcfe per day (predominantly dry gas). Estimated total proved reserves associated with the Divested Properties, as determined by Carrizo's third party engineer at year-end 2011, is approximately 312 Bcfe (comprised of 177 Bcfe of proved developed and 135 Bcfe of proved undeveloped reserves), of which 53 Bcfe are non-operated. The company intends to use net proceeds from the sale to repay borrowings under its revolving credit facility and use the excess proceeds to partially fund its 2012 capital expenditures plan, largely in the Eagle Ford play. Carrizo estimates that when its borrowing base is re-determined in April, it will be around $300 million after adjusting for the impact of the Divested Properties and the benefit from oil/liquids developed reserve additions in the first quarter 2012, largely related to the Eagle Ford development. EBITDA from the Divested Properties will continue to be included in Carrizo's financial results until closing in late April. Credit Suisse and Baker Botts LLP acted as Carrizo's financial adviser and legal adviser on this transaction, respectively.

Midstream complex on tap for Ohio Utica

Chesapeake Energy Corp. has executed definitive agreements to build an integrated midstream service complex in eastern Ohio that will provide infrastructure to process natural gas and natural gas liquids in the Utica Shale play. Chesapeake, through affiliates of its wholly owned subsidiary, Chesapeake Midstream Development LP, has entered into a partnership with M3 Midstream LLC (Momentum) and EV Energy Partners LP to develop the complex. It will consist of natural gas gathering and compression facilities constructed and operated by CMD, as well as processing, NGL fractionation, loading and terminal facilities constructed and operated by Momentum. The cryogenic processing facility will be in Columbiana County and will have an initial capacity of 600 million cubic feet per day. NGLs will be delivered to a central NGL hub complex in Harrison County that will feature an initial NGL storage capacity of 870,000 barrels and fractionation capacity of 90,000 barrels per day, as well as a substantial rail-loading facility. The partnership plans to invest approximately $900 million over the next five years with the majority of the capital invested in the first two years. The current ownership structure of the partnership is 59% by affiliates of CMD, 33% by Momentum and 8% by EVEP. Total E&P USA Inc., Chesapeake's 25% joint venture partner in the Utica Shale wet gas acreage, has an option to participate in the project, which may proportionately reduce the ownership of CMD affiliates and EVEP to 44% and 6%, respectively. Engineering and procurement has begun and the first cryogenic processing and fractionation plants are scheduled to be in service by the second quarter of 2013.

American Standard acquires 72,300 net acres

American Standard Energy Corp. has acquired roughly 72,300 net acres and approximately 250 barrels of oil equivalent per day of production from privately-held Geronimo Holding Corp. The purchase included 22,519 net acres in the Permian Basin, with the largest contiguous acreage concentrations in the Texas counties of Crockett, Edwards, Crane, Lea and Mitchell. With this acquisition, the company holds 29,000 net acres in the Permian Basin. American Standard acquired 6,227 net acres in the Eagle Ford and now holds just over 7,400 net acres in the area, all within La Salle, Frio, Wilson, Gonzales and Maverick counties in Texas. In the Williston Basin, American Standard added 9,801 net acres to its existing leasehold acreage and now holds working interests in more than 42,200 net acres in North Dakota. American Standard paid Geronimo $10 million in cash, an unsecured, subordinated note paid in the principal amount of $35 million, and five million shares of American Standard Energy's common stock, valued at $2.70 per share. Geronimo, based in Midland, Texas, is controlled by Randall Capps, majority stockholder and director.

Atlas, OPITO launch online safety training

Atlas Interactive, in partnership with the nonprofit Offshore Petroleum Industry Training Organization, has launched International Minimum Industry Safety Training Online, a standardized basic safety training technology available online for the exploration and production industry. IMIST Online is being rolled out across 30 countries worldwide over the next two years. The e-learning program is available in four languages, and assesses basic safety knowledge in nine subject areas, including risk assessment, asset integrity, use of hazardous substances, working at height and mechanical lifting.

'Constitution Pipeline' to serve northeast markets

Cabot Oil & Gas Corp. has entered a joint venture with Williams Partners LP to develop and construct a large-diameter pipeline to transport Cabot's Marcellus production to the New England and New York markets. The high-pressure "Constitution Pipeline" will move at least 500,000 Mcf per day from Cabot's acreage in Susquehanna County, Pa., to interconnect with both Iroquois Gas Transmission and Tennessee Gas Pipeline in Schoharie County, N.Y. Williams Partners will be a 75% owner and, through its affiliate, will operate the pipeline, while Cabot will retain a 25% equity position. The project is subject to receipt and acceptance of regulatory approvals. The initial in-service date is March 2015.

Insight Venture Partners leads Drilling Info investors

Insight Venture Partners is leading a $165 million equity investment in Drilling Info, the Austin, Texas-based data intelligence provider to the oil and gas industries. Proceeds from the investment will fund expansion of Drilling Info's SaaS-based data and analytics offerings and to Drilling Info's early investors. Drilling Info serves a range of clients, from large global enterprises to independent drillers, service providers and investors. The company's Drillinginfo tools provide recent research and information, such as land title, leases, well completion and well production data that allow customers to make decisions and maximize returns on investment. Insight, a private equity and venture capital firm, is joined in the deal by Battery Ventures and Eastern Advisors Private Fund. Vaquero Capital acted as advisors to Drilling Info.

Talisman Energy sellsnon-core coal assets

Calgary-based Talisman Energy Inc. has agreed to sell certain non-producing, non-core coal properties in Northeast British Columbia to Xstrata Coal for US$500 million in cash. The Sukunka coal property is located 60 kilometers south of Chetwynd, along the Peace River coalfield that extends 400 kilometers across Northeastern British Columbia. The licenses cover an area of more than 20,000 acres and contain an underground mineable deposit of coking coal (all Talisman 100% working interest). The transaction was expected to close in March 2012. BofA Merrill Lynch acted as advisor to Talisman.

Gulfport Energy, MarkWest eye Utica infrastructure

MarkWest Utica EMG LLC, a joint venture between MarkWest Energy Partners LP and The Energy and Minerals Group, has executed a letter of intent with Oklahoma City-based Gulfport Energy Corp. to provide gathering, processing, fractionation, and marketing services in the liquids-rich corridor of the Utica shale in eastern Ohio. MarkWest Utica will develop natural gas gathering infrastructure with Gulfport and other producers primarily in Harrison, Guernsey, and Belmont counties that is expected to come online in 2012. MarkWest Utica will process the gas at its Harrison County processing complex. It will provide NGL fractionation and marketing services at the Harrison County fractionator, where NGL purity products will be marketed by truck, rail and pipeline.

DME undergoesrecapitalization

Derivatives marketplace CME Group, and Oman Investment Fund, a sovereign wealth fund of the Sultanate of Oman, plan to increase their investments in the Dubai Mercantile Exchange (DME) to further its growth. As part of the restructuring of the DME's equity shareholding, a recapitalization arrangement will increase the stake in DME held by CME Group's NYMEX division from 25% to 50%. Oman Investment Fund will increase its holding to 29%; a subsidiary of Dubai Holding will retain 9%; and 12% will be held on a non-voting basis by strategic investors, including Vitol, Shell, JP Morgan, Morgan Stanley, Goldman Sachs and Concord Energy.

Wapiti Energy to acquire Uinta Basin reserves

Wapiti Energy LLC has formed Wapiti Oil & Gas II LLC and has entered into an agreement with a subsidiary of Gasco Energy Inc. to acquire natural gas reserves in the Rocky Mountain region. Wapiti will purchase an undivided 50% interest in Gasco's Uinta Basin producing oil and gas assets for $20.75 million in cash, and carry Gasco for $15 million of drilling and completion costs in a $37.5 million drilling program over the next two years. In addition, Wapiti will expend an additional $15 million to cover its proportionate share of the drilling and Gasco shall pay an additional $7.5 million alongside Wapiti. If the 5 year NYMEX natural gas strip closes on February 23, 2013, at a price greater than or equal to $5.00 per MMBTU, Wapiti will increase the size of the drilling program to $43.75 and carry Gasco for an additional $2.5 million.

Baker Hughes introduces WellLink™

Baker Hughes has introduced its WellLink™ Radar Remote Drilling Advisory Service.™ The service identifies potential drilling issues by pinpointing similar case histories in real time using a global library of drilling practices and expert advice. It leverages Verdande Technology's DrillEdge™ software to reduce uncertainty, minimize nonproductive time and increase safety. Baker Hughes' remote service engineers monitor real-time drilling operations around the clock while the DrillEdge™ software looks for patterns based on similar situations where issues have occurred in previously drilled wells. When a similar situation occurs, the software automatically recalls relevant cases from the Baker Hughes' knowledgebase of experience and best drilling practices. The engineers investigate, validate and determine the best course of action, and then make recommendations to avoid potential drilling challenges. New cases can be included in the knowledgebase, allowing for continuous enrichment.