EQT Production Co., a subsidiary of Pittsburgh-based EQT Corp., has won a bankruptcy auction to acquire 53,400 core net Marcellus acres, including drilling rights on 44,100 net acres in the Utica, from Stone Energy Corp., Lafayette, La., for $527 million.
The acquired acres are within EQT’s core liquids-rich development areas primarily in Wetzel, Marshall, Tyler, and Marion counties of West Virginia, complementing the firm’s adjacent operations. The acquisition includes current production of 80 MMcfd of natural gas equivalent and 173 new Marcellus locations.
The acreage has an average 85% net revenue interest and 86% is either held by production or has lease expiration terms that extend beyond 2019.
The assets include 174 Marcellus wells, of which 123 wells are developed and 51 are in progress. Also included are 20 miles of gathering pipeline and an additional 32,000 acres outside the company’s core development area.
Pending final approval by the bankruptcy court at a hearing scheduled for Feb. 10, the deal is expected to close on or about Feb. 28. EQT will finance the acquisition with cash on hand.
Stone’s restructuring efforts
Stone had previously agreed to sell the properties to TH Exploration III LLC, an affiliate of Fort Worth-based Tug Hill Inc., for $360 million as part of Stone’s balance sheet restructuring efforts (OGJ Online, Oct. 24, 2016).
Stone and its US subsidiaries subsequently filed voluntary petitions under Chapter 11 of Title 11 of the US Code in the Bankruptcy Court, which resulted in two more firms being allowed to participate in bidding for the properties.
A portion EQT’s winning purchase price will be used to pay the breakup fee and expense reimbursement in the initial deal with Tug Hill. American Petroleum Partners Operating LLC, which submitted a bid including a final purchase price of $526 million and otherwise on the same terms as the winning bid, was selected as the back-up bidder.
“With the successful conclusion of the auction, we are now poised to move forward with our prepackaged plan, with Stone, its noteholders, and the bank group all in agreement on a plan of action,” commented David H. Welch, Stone chairman, president, and chief executive officer.
“This should allow Stone to emerge as a much stronger, healthier company with significant debt reduction, a solid balance sheet, and a focused portfolio of deepwater producing assets and near-term drilling opportunities,” he said.
Stone in the Gulf of Mexico has interests in more than 100 blocks, many of which are in the northern Mississippi Canyon and southern Viosca Knoll regions, 100 miles southeast of New Orleans. The firm’s operations in the area are anchored around the Pompano and Amberjack platforms.
EQT’s Marcellus expansion over the past year has included the acquisitions of 42,600 net acres from Trans Energy Inc. and entities affiliated with Republic Energy for $513 million; and 62,500 net acres from Statoil ASA for $407 million (OGJ Online, May 2, 2016).
Contact Matt Zborowski at [email protected].