Industry Briefs

Dec. 1, 2007

Denbury sells Louisiana natural gas assets

Denbury Resources Inc. has entered into an agreement to sell its Louisiana natural gas assets for $180 million plus any amounts received from a net profits interest to a privately held company. The potential net profits interest relates to a sharing of production from a well in South Chauvin field if operating income from that well exceeds certain levels, which the company believes could potentially increase the ultimate sales price by up to 10%. Production attributable to the properties averaged nearly 28.8 MMcfe/d (85% natural gas) during the second quarter of 2007, representing roughly 11% of Denbury’s total second quarter production, and about 4% of the total proved reserves as of December 31, 2006. The company plans to reduce its bank debt with the proceeds. The company’s bank borrowing base will remain unchanged at $500 million. The company has also swapped 60 MMcf/d of its 2008 natural gas production at a weighted average price of $7.91 per MMbtu. Based on preliminary forecasts after the Louisiana sale, these derivative contracts are expected to be between 70% and 80% of the company’s natural gas production.

Canetic to buy Titan for $116 million

Canetic Resources has entered into a pre-acquisition agreement with Titan Exploration Ltd. to acquire all of the issued and outstanding shares of Titan for $116 million, including Titan’s net debt of roughly $17.5 million. FirstEnergy Capital Corp. acted as exclusive financial advisor to Titan and has provided Titan’s board with its verbal fairness opinion. The agreement provides for a non-completion fee of $3.5 million, payable by Titan to Canetic in certain circumstances and a non-completion fee of $1.7 million, payable by Canetic to Titan in certain circumstances. Upon completion, Canetic will acquire production of more than 1,800 boe/d, weighted 63% to oil, and a Canetic estimated 7.3 million boe/d of proved plus probable reserves with a Reserve Life Index of approximately 11 years. Canetic will also acquire more than 49,000 gross acres in the Leitchville area of Southwest Saskatchewan, in close proximity to Canetic’s existing 45,100 gross acres. In addition, Canetic will acquire nearly 900 boe/d of production located in the northern regions of Alberta and British Columbia.

Antrim enters $50.2M financing deal

Antrim Energy has entered into an agreement with a syndicate of underwriters led by Wellington West Capital Markets Inc. and including Tristone Capital Inc. and Cormark Securities Inc. pursuant to which the underwriters have agreed to purchase 8,300,000 common shares of the corporation on a bought deal basis, at a price of $6.05 per common share for aggregate gross proceeds of $50.2 million with the option to purchase up to an additional 1,245,000 shares at the issue price at any time prior to 30 days following the closing for further gross proceeds of $7,532,250. Antrim plans to use the net proceeds from this financing to fund its exploration and development projects and for corporate working capital.

Escondido completes $249.5M sale to Swift; forms Escondido Resources II

Escondido Resources LP, a privately-held EnCap Investments LP financed company, has closed the sale of interests in three South Texas properties to Swift Energy Co. for $249.5 million. Escondido’s advisors were Simmons & Co. International and Griffis & Associates LLC. The sale includes properties located on an aggregate 82,900 acres in the Sun TSH area in La Salle County, the Briscoe Ranch area primarily in Dimmit County, and the Las Tiendas area in Webb County. Production is roughly 85% natural gas and natural gas liquids and averaged nearly 21 MMcfe/d net to the purchased working interests during the second quarter of 2007. Escondido Resources II LLC was formed to continue to acquire and exploit oil and gas properties primarily in South Texas and the Permian basin, a strategy similar to Escondido Resources LP. Escondido Resources II LLC will be funded by a capital commitment from EnCap Energy Capital Fund VII and the Escondido management team.

Petroleum Development purchases interest in Castle Gas wells for $53M

Petroleum Development Corp. has entered into a definitive agreement to purchase a majority working interest in approximately 760 natural gas wells located in southwestern Pennsylvania, which are operated by Castle Gas Co. Inc. for $53 million. The sale includes roughly 47 bcfe of reserves net to the purchased interest (15.8 bcfe net proved developed producing, 31.2 bcfe of net proved and probable undeveloped reserves) and associated pipelines, equipment, real estate, and undeveloped acreage. Upon closing, PDC will be the operator on the majority of the properties. Petroleum Development Corp. is an independent energy company engaged in the development, production, and marketing of natural gas and oil.

T-3 completes purchase of EEC, HP&T for $96M

T-3 Energy has completed the purchase of both Energy Equipment and HP&T Products, for nearly $96.4 million in cash, subject to final working capital adjustments. The acquisitions of EEC and HP&T were funded from T-3’s working capital and the use of its $180 million amended and restated senior credit facility. EEC manufactures proprietary HP&T high-performance gate valves for both drilling and sub-sea applications; a wide range of Model HPT valve manifolds, including under-balanced drilling and flow-back manifolds; proprietary Model HXE high-performance chokes; and a host of other oil and gas valve and drilling products.

Bristow to sell Grasso for $22.5 million

Bristow plans to sell its Grasso Production Management business to Production Services Network Ltd. for $22.5 million (excluding cash and certain intercompany accounts), subject to post closing adjustments. GPM is a contract operator of oil and gas production facilities in the US Gulf of Mexico. Bristow is selling GPM for near book value, with a net loss of roughly $6 million related to taxes on non-deductible goodwill and transaction costs. Results of GPM for the current and prior periods will be classified as discontinued operations in Bristow’s results for the quarter ended December 31, 2007.

Mustang contracted by ATP for support

Mustang Engineering, a subsidiary of international energy services company John Wood Group PLC, has been awarded a contract by ATP Oil & Gas Corp. to provide detailed engineering and procurement support for the topsides production facilities on ATP’s first newbuild deepwater facility, the Telemark Hub floating drilling/production facility, also known as Mirage. The facility will be located in 4,000 feet of water at Block MC-941, offshore Louisiana in the Gulf of Mexico. Designed for 25,000 b/d oil and 50 MMscf/d gas, the unit will have expansion capability to 100 MMscf/d gas. It will incorporate six dry-tree wellheads with three pairs of future subsea flow lines. Mustang is an independent services provider to the global oil, gas, chemical, and manufacturing industries. Wood Group is an international energy services company.

Chesapeake’s DFW Airportlease wells begin production

Chesapeake Energy Corp. has recently initiated production of nearly 30MMcfe from the first 11 wells on its 18,000-acre Dallas/Fort Worth International Airport lease. The lease was acquired nearly one year ago for $185 million. The company plans to drill roughly 300-325 wells on the lease. Assuming an estimated average recovery of approximately 2.5-3.0 bcfe gross reserves per well, the company believes that up to one trillion cubic feet of natural gas equivalent reserves can be produced for $2.00 per mcfe. Chesapeake has employed five drilling rigs on a continuous basis at the airport and anticipates maintaining that level of activity through 2011. To date, Chesapeake has initiated drilling activities on 33 wells, has started completion activities on 18 wells, and is selling natural gas from 11 wells. Chesapeake hopes to reach a peak production level from the lease of nearly 250 mmcfe/d by year-end 2011 and expects production to continue for at least the next 50 years.

Canoro CFO makesprivate placement

Now that all drilling operations have been completed, Brian Gieni, Canoro Resources’s vice president of finance and CFO has made a private placement. Gieni previously indicated his intention to invest in the company when he commenced employment in August 2007. The private placement consists of 185,000 common shares at $1.38 per common share, for total proceeds of $255,300. These securities will be subject to a four-month hold. Net proceeds will be added to working capital and used primarily to fund the work programs on the company’s development and exploration blocks in northeast India. Canoro also granted an aggregate of 1.1 million options to purchase common shares for a five year term under the company’s stock option plan to its directors, executive officers, employees, and consultants at an exercise price of $1.38 per share. The options will vest over three years.

Cameron signs 3-yeardeal with Schlumberger

Cameron has signed a three-year worldwide preferred supplier agreement with Schlumberger Integrated Project Management (IPM) for the supply of a wide range of flow equipment products and services. Cameron will provide Schlumberger IPM with all surface, subsea, drilling, measurement, compression, and downstream equipment on a worldwide basis.

Quest Resources to mergewith Pinnacle Gas Resources

Quest Resource and Pinnacle Gas Resources have unanimously approved a stock-for-stock merger. Based on the closing market prices for the shares of both companies on October 15, 2007, the combined company would have an equity market capitalization of nearly $450 million and Pinnacle stockholders will receive Quest common stock worth roughly $207 million. Quest’s current stockholders will own about 55% of Quest and Pinnacle’s current stockholders will own the remaining 45%. The merger is expected to be tax free to stockholders of both companies. “This acquisition is consistent with Quest’s long-term strategy to acquire and develop significant unconventional resource opportunities to support the growth of our planned upstream MLP strategy,” said Jerry D. Cash, Quest’s chairman, president, and CEO. Cash will continue to serve as chairman, president and CEO and as a director of Quest. The board of Quest will consist of seven directors, four designated by Quest and three designated by Pinnacle. Pinnacle will survive as a wholly-owned subsidiary of Quest. Quest will continue to be listed on the Nasdaq.

Petroleum Geo-Services acquires depth imaging company for $51M

Petroleum Geo-Services has agreed to acquire Applied Geophysical Services Inc. (AGS) for $51 million. Houston-based AGS provides advanced depth imaging services. AGS delivers depth imaging services to the oil and gas industry, currently focusing primarily on the depth market in the Gulf of Mexico, using a proprietary 3D beam migration technology. Petroleum Geo-Services is a focused geophysical company providing seismic and reservoir services, including acquisition, processing, interpretation, and field evaluation. PGS operates on a worldwide basis with headquarters at Lysaker, Norway.

Berry Petroleum to form MLP; S&P rating remains unchanged

Bakersfield, Calif.-based Berry Petroleum Co. plans to form a master limited partnership and intends to proceed with an initial public offering of common units representing limited partner interests in the MLP. The MLP is expected to own certain of Berry Petroleum’s long-lived oil and natural gas properties. Berry expects to file a registration statement with the SEC for the initial public offering of common units of the MLP during the fourth quarter of 2007 and anticipates that the offering will be made during the first half of 2008. Approximately $125 million to $175 million of common units are expected to be offered to the public. Berry intends to use the proceeds to reduce debt and for the acceleration of certain development projects. Berry will own the general partner of the MLP and is expected to retain a significant interest in the MLP at the close of the initial public offering. Standard & Poor’s Ratings Services said that the company’s BB-/Stable ratings are not affected by the MLP announcement due to the relatively small size of the anticipated drop-down and the company’s plans to reduce debt with the proceeds.

RAM acquires Ascent Energy

RAM Energy Resources will acquire Ascent Energy Inc., a privately-held company, for a combination of $185 million in cash, RAM common stock, and 6.2 million RAM warrants. Ascent’s properties are comprised of both conventional and unconventional oil and natural gas assets. Netherland Sewell & Associates audit of Ascent’s proved reserves totaled 18.6 million boe, consisting of 8.5MMboe of proved developed producing reserves, 1.3MMboe of proved developed non-producing reserves, and 8.8MMboe of proved undeveloped reserves. The acres are located in south and east Tex., Okla., and La. Ascent also owns nearly 84,798 gross acres of unconventional shale gas leases in the Barnett Shale and the Devonian Shale. RAM anticipates increasing its current $300 million credit facility to a $500 million senior secured credit facility with an initial borrowing base of $375 million, which it expects to use to fund the cash portion of the transaction. Additionally, proceeds will be used to refinance RAM’s existing outstanding borrowings and to fund a portion of the combined company’s future capital expenditures, acquisitions, and working capital needs. RBC Capital Markets Inc. provided the fairness opinion.

XTO Energy pays $550Mfor Barnett shale properties

XTO Energy Inc. has acquired 24,000 net acres in the Barnett Shale from multiple parties for roughly $550 million. XTO’s internal engineers estimate proved reserves to be in excess of 200 billion cubic feet of gas equivalent. The acquisitions will initially add about 25 million cubic feet of natural gas equivalent per day to the company’s growing production base. The company has identified an additional 300-350 drilling locations on the properties for future development. XTO Energy is a domestic natural gas producer engaged in the acquisition, exploitation, and development of long-lived oil and natural gas properties in the US.

Bourbon orders two MPSVs from Socarenam

Following a European bid tender, Bourbon has ordered two high-tech multi purpose supply vessels from Socarenam, the French shipyard based in Boulogne-sur-Mer. The two MPSVs will be used to provide support in specific offshore operations, such as the maintenance of oil facilities or production maintenance work and subsea inspections. They are equipped with diesel-electric propulsion and a redondant dynamic positioning system (Class 2). The vessels have eight anchors which, combined with the Dynamic Positioning technology, offer flexibility in operational positioning. These vessels have been designed with low draught to allow increased accessibility in shallow zones such as estuaries or rivers. The two vessels will be delivered in the second half of 2009. Bourbon offers, in more than 25 countries, a broad range of offshore oil and gas marine services, towage, assistance, salvage and bulk shipping.