Continental Resources Inc., Oklahoma City, formed a joint venture with a wholly owned US subsidiary of SK E&S Co. Ltd. to jointly develop 44,000 net acres of Continental's northwest Cana Woodford natural gas assets, primarily in Blaine and Dewey counties, Okla.
Terms called for Continental to sell 49.9% interest in the northwest Cana area, including interests in 37 producing wells, for $360 million.
"Our agreement with Continental underscores SK's 20-plus year commitment to the US market as a platform for the globalization of our energy business and as a source of value-creation for stakeholders in both companies," said Shaun Parvez, president of SK E&S Americas.
This transaction is the latest in which national oil companies, international oil companies, and others have invested in US and Canadian shale gas plays in a trend that analysts say helped drive North American merger and acquisition activities for years (OGJ Feb. 28, 2011, p. 18).
SK E&S, an affiliate of SK Group, is a South Korea energy service provider, engaged in city gas, district heating, gas-fueled electricity generation, and LNG businesses. SK Group is one of the largest conglomerates in South Korea, primarily involved in the chemical, petroleum and energy industries.
Continental received $90 million at closing, and SK has committed to pay an additional $270 million to carry 50% of Continental's remaining share of future drilling and completion costs. Continental has 5 years to utilize the carry, subject to extension under certain circumstances.
The agreement also establishes an area of mutual interest (AMI) in northwest Cana and certain incentives for the joint venture to expand its leasehold position.
Continental will operate all current and future wells that are operated by the joint venture. The company planned to begin drilling in the AMI during November, with four operated rigs running by Dec. 31, 2014.
