Industry Briefs
Noble, CONSOL close $3.4B partnership in Marcellus
Noble Energy has closed the previously announced agreements which create a joint venture partnership with CONSOL for the development of Marcellus Shale properties in southwest Pennsylvania and northwest West Virginia. Under the agreements, Noble Energy acquired a 50% interest in 628,000 net undeveloped acres for approximately $1 billion, payable in three installments of which the first is $327 million. The company also purchased a 50% interest in existing Marcellus production and infrastructure for approximately $232 million. In addition, Noble Energy agreed to fund approximately $2.1 billion of CONSOL's future drilling and completions costs, which are expected to extend over an eight-year period. The total amount Noble Energy paid at closing was $593 million, which included the first installment payment, the full amount for production and infrastructure, and customary adjustments for net cash between the effective date and closing. The second and final installments will be paid on the first and second anniversaries of the closing, respectively.
Carrizo enters Utica partnership with Avista
Building upon the existing relationship Carrizo Oil & Gas Inc. has with private equity firm Avista Capital Partners in the Marcellus Shale, the two companies have just announced a joint venture agreement to acquire and develop acreage in the Utica Shale. The acreage aquired by the Carrizo/Avista joint venture contains a mix of eastern Ohio and northwestern Pennsylvania acreage. Under the terms of the agreement, Carrizo will own an initial 10% interest in the joint venture properties with Avista owning the remaining 90%. Avista has the right to contribute aggregate funds of up to $130 million to the joint venture, with the ability to raise this amount by an incremental $70 million. Carrizo holds two purchase options to increase its participating interest to 50% in the properties acquired by the joint venture over the next 18 months. Carrizo's purchase options may be exercised at specified increments above acreage cost and associated improvements at any time during the option period. In the event these purchase options are not exercised, Carrizo will be entitled to share in any cash distributions by Avista to its partners, provided specified return on investment thresholds on Avista's investment are achieved.
Carrizo will initially serve as operator of the joint venture properties and will provide certain management services to Avista related to the joint venture. In its note to investors September 30, Global Hunter Securities (GHS) pointed out that a Utica acquisition was possible on the heels of Carrizo's deal with India's Gail Ltd. in the Eagle Ford Shale. "The partnership with private equity firm Avista and the received cash from yesterday's Eagle Ford joint venture should provide ample liquidity for Carrizo to further build a meaningful position in the emerging Utica play," noted GHS analysts.
Antero Resources increases Marcellus Shale leasehold
Denver, Co.-based Antero Resources has acquired a 7% overriding royalty interest from CONSOL Energy on 115,647 net acres located in nine counties in southwestern Pennsylvania and north central West Virginia for $193 million. The acquisition increases Antero's production by 12 MMcfpd ($16,083 per flowing Mcfepd) and proved reserves by 60 bcfe ($3.22 per Mcfe) free from incremental lease operating costs, noted Global Hunter Securities (GHS) in a September 26 note to investors. Antero now holds approximately 200,000 net acres in the Marcellus play with net production increasing 36% from six additional wells since the company announced 2Q11 earnings to approximately 181 MMcfpd from 53 horizontal wells. GHS views the all-cash transaction as a positive for Antero as the company has increased its leasehold in the liquids rich portion of the Marcellus play.
PDC Energy makes aggressive Marcellus bid
PDC Energy, through PDC Mountaineer LLC (PDCM), its JV with Lime Rock Partners V, has entered into an agreement to acquire the membership interests of Seneca-Upshur LLC for $152.2 million—$76.3 million estimated net cost to PDC Energy. PDCM is to acquire and operate approximately 90,000 net acres targeting the Marcellus Shale and 10,000 net acres prospective to the Huron Shale. The acreage is 100% held by production and has an average working interest of 95%. The acreage has roughly 30 bcfe of net proved developed reserves and is producing 5.4 MMcfepd. Development is schedule to commence in 2012. PDC Energy anticipates funding the transaction from its existing credit facility, and may seek reimbursement of the cost through selling non-core assets. In relation to the transaction, PDCM has enhanced its long-term transportation commitment to Equitrans, a subsidiary of EQT Corp. (EQT), for Marcellus Shale production. The new commitment is for transporting up to 76 MMcfepd.
Flint wins Alberta oil sands construction contract
Flint Energy Services Ltd. has been selected as the construction contractor for a major SAGD oil sands project in the Wood Buffalo Region near Fort McMurray, Alberta. The contract involves field construction and is valued at approximately $430 million. Flint will be responsible for the construction of two major silos of work within the central plant facility. The scope of the project consists of Flint's traditional mechanical and electrical direct field activities, as well as construction management and support. Flint's work will commence in the first quarter of 2012 and will continue until mid-2014. Flint anticipates this project will employ over 1,500 people at peak. Earlier this year, the company reported $300 million in additional backlog from two other oil sands projects. The company currently has over 1,400 workers engaged in work on these projects.
Samson O&G wins Hawk Springs acreage
Samson O&G Ltd. has been awarded, on a conditional basis, approximately 956 net acres of leasehold offered by competitive tender from the University of Wyoming. This land is part of the University's agricultural research facility. The acreage is within Samson's propriety 3-D seismic coverage. Samson has also acquired additional acreage in the State of Wyoming's lease sales as well as leasing acreage from fee owners. Accordingly, Samson has now increased its holding to 17,489 net acres in the Hawk Springs area. This holding assumes that Samson's farminee exercises its full right to earn a 25% interest within the farm in area. In the area, the Defender US33#2-29H well (in which Samson O&G carries a 37.5% working interest) in Goshen County, Wyoming, has reached the Niobrara core point at a depth of 6,937 feet and is currently cutting 120 feet of core from the Niobrara ‘A' and ‘B' intervals. The Defender US33 #2-29H is the first Niobrara appraisal well in Samson's Hawk Springs project.
Weaver expands energy credit brokering services
Independent accounting firm Weaver is expanding its energy credit brokering services as part of the renewable and energy compliance practice. Services include assisting clients with the purchase and sale of various energy credits, including Renewable Identification Numbers, sulfur credits, benzene credits and Low Carbon Fuel Standard credits. These services will be managed by Sandra Dunphy, a director in Weaver's energy compliance practice, and Candace Loesby, who recently joined the firm from a multi-national energy company. Dunphy has experience in the renewable energy, petroleum fuels and compliance arena. She has expertise in energy contract negotiation services, industrial energy conservation strategies and energy distribution networks. She previously developed an ever-growing fuel credit brokering business associated with the US Environmental Protection Agency. Loesby has worked in energy compliance and reporting for several years and also has credit contract negotiation experience.
New CEO, investment and new brand identity for RLC
RLC, a large, privately-held helicopter operator for the oil and gas industry in the Gulf of Mexico, has appointed a new CEO, secured a strategic investment from Sankaty Advisors, and unveiled a new corporate brand identity. Dru Milke has been named CEO of RLC. The company also recently named Larry Adams as COO and Michael Guidry as vice president of operations. The Broussard, LA-based company received a strategic investment from Boston-based Sankaty Advisors. Terms of the deal were not disclosed. In addition, the company unveiled a new corporate brand identity including a new logo, tagline and redesigned website. RLC, previously known as Rotorcraft Leasing Company, has standardized on the name RLC.
Cougar O&G grabs leases in Alberta land sale
Cougar O&G Canada Inc. has acquired an additional 3 sections of land (1,920 acres) at an Alberta Provincial Government land sale on Wednesday August 25, 2011. The acquired lands are on the southern boundary of lands acquired by the company in July of 2010 and the 3D seismic program conducted in early 2011. The company believes there are extensions of reserves identified in the seismic and the Reserves Assessment and Evaluation of the new or previously unevaluated Trout Core oil properties of Cougar, released on July 14, 2011. That review completed based on existing information in the public domain coupled with the extensive Cougar 3D seismic program placed a $77.4 million Cdn Net Present Value discounted 10% for Proven (P1) plus Probable (P2) plus Possible (P3) and an estimated 2.7 million barrels recoverable P1+P2+P3 from the project. The report is based on a previously announced logical development plan with a 2-4 well drill program to be followed up with a 4-6 well program. Those programs are dependent upon financing.
Gastar's first two Marcellus wells demonstrate productivity
Gastar Exploration's first two horizontal Marcellus wells, the Wengerd 1H and 7H (44.5% WI, 37.5% NRI), produced at a combined gross initial 30-day rate of 7.1 MMcfd of 1285 btu/Mcf natural gas and 176 bbls of condensate per day. Production began August 11, and they are producing through a 5.5 inch casing at 1,250 psi flowing casing pressure. Initial test rates for the wells were adjusted from numbers provided on July 27 to a combined 13.5 MMcfed (11.1 MMcfd and 410 bcpd) from 14.0 MMcfed (9.7 MMcfd and 720 bcpd) due to a metering error overstating condensate production. The company expects four additional Marcellus Shale horizontal wells to be brought on at the end of October and at least three more before year end 2011.
Legend Oil and Gas works to acquire Kansas production
Legend Oil and Gas Ltd. has signed a Letter of Intent to purchase producing oil assets in southeastern Kansas from Double 7 Oil and Gas LLC. The assets contain 29 wells which cumulatively produced an average of 16 barrels oil per day (bopd) during a seven day test production period in August, 2011. There are an additional 14 water injection wells which have yet to be put into service. The production is located on a 240 acre contiguous lease in the McCune area of southeastern Kansas. Legend Oil and Gas Ltd. is a managed risk, oil and gas exploration/exploitation, development and production company with activities currently focused on leases in southeastern Kansas, northern North Dakota and Canada.
BOEMRE split complete
The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) announced a final rule that separates the federal regulations that govern offshore energy and resource development between the Bureau of Safety and Environmental Enforcement (BSEE) and the Bureau of Ocean Energy Management (BOEM), effective October 1, 2011. The two bureaus will become operational on that date, completing the reorganization of the former Minerals Management Service (MMS). Those regulations that will apply to BSEE will remain in Title 30 of the Code of Federal Regulations, Chapter II, but will be renamed "Bureau of Safety and Environmental Enforcement." Regulations that apply to BOEM will be removed from Chapter II and placed in a newly created Chapter V entitled, "Bureau of Ocean Energy Management." The bureau previously reassigned regulations governing royalty management to the Office of Natural Resources Revenue, which has been operating separately from the rest of the agency since October 1, 2010. In addition, a proposed rule that will address changes to BOEM and BSEE regulations required by the split will be issued in the next few weeks. That proposed rule will address specific issues raised by splitting the functions of one agency into two bureaus.
Denbury approves $500M stock repurchase program
Denbury Resources Inc. has approved a common stock repurchase program for up to $500 million of Denbury shares. The company currently has approximately 402 million common shares outstanding and its total market capitalization is approximately $4.6 billion based on the closing price of the company's stock on September 30, 2011. The company recently amended its bank credit facility to provide for up to $500 million of combined stock repurchases or dividend payments made in compliance with other credit facility covenants. The company plans to fund its share repurchase program with a combination of cash flow from operations and borrowings on the company's $1.6 billion bank credit facility, under which $110 million was outstanding on September 30, 2011.
Flare Industries gets capital infusion from Turnbridge Capital
Austin-based Flare Industries Inc. has completed a majority recapitalization by energy-focused private-equity firm Turnbridge Capital LLC. GulfStar Group served as exclusive financial advisor to Flare. The company's legal advisor was DuBois, Bryant & Campbell LLP of Austin, TX. Flare designs manufactures and installs combustion and pollution control technology and equipment. Through its offices in the US, Canada, UK, UAE, and Singapore, Flare delivers high-quality flare systems, thermal oxidizers and ignition systems to clients in a range of industries worldwide. The GulfStar Group transaction team included managing director Alan Blackburn and associate Jay Stone. Owned entirely by its principals, Turnbridge pursues investments in the middle market alongside experienced management teams. Typical transactions for Turnbridge involve companies which range in enterprise value from $25 million to $250 million. GulfStar Group is a middle market investment and merchant bank headquartered in Houston, TX, with a market presence in Austin, Dallas, Louisiana and Oklahoma. GulfStar specializes in providing merger and acquisition advisory services, institutional private placements of equity and debt, restructuring and turnaround advisory services and general corporate finance advisory services to companies with revenues or enterprise values generally ranging from $25 million to $350 million. Since its formation in 1990, GulfStar has completed over 500 transactions in more than 30 states and six foreign countries across a variety of industries. Through its merchant banking affiliate, the firm also makes equity and subordinated debt co-investments.
Detcon to join Industrial Safety Technology Platform
Industrial Safety Technology LLC has acquired Houston-based Detcon, a provider of fixed gas detection products. Detcon will join recently acquired Gas Measurement Instruments (GMI) as an independent operating company within the Industrial Safety Technology platform. Together the companies create a comprehensive portfolio of fixed and portable gas detection products with global reach.
Detcon designs and manufactures industrial grade gas detection sensors and electronic control systems, with a particular strength in oil and gas markets. Detcon founder Dan Alpha and Detcon president Bob Masi will remain actively involved with the company.
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