Industry briefs

ConocoPhillips prepares for spin-off, CEO retirement

Following a strategy enacted by other oil and gas companies before it, Houston-based oil and gas supermajor ConocoPhillips is planning a spin-off into two, stand-alone public companies. According to the company, separating the company's Refining & Marketing business from the Exploration & Production business via a tax-free spin-off is meant to focus on value creation for shareholders. Jim Mulva, an executive at the company since 1990, plans to retire when the spin-off is complete. The transaction is expected to close in the first half of 2012.

$159M equity raise should keep Kodiak self-funded

Denver-based Kodiak Oil & Gas Corp. has closed its public offering of 27,600,000 shares of common stock, which includes the full exercise of the underwriters' over-allotment option of 3,600,000 shares, for net proceeds of $159.4 million. Shares were sold for $6.10 per share. Credit Suisse Securities (USA) LLC, KeyBanc Capital Markets Inc. and Wells Fargo Securities LLC acted as joint book-running managers. Proceeds will be used to repay revolving credit facility debt, to fund capital expenditures related to drilling, development and infrastructure, principally in the Bakken play located in North Dakota, and for general corporate purposes, including financing the potential acquisition of oil and gas properties in certain core areas, such as the Bakken. The company recently took delivery of a 4th operated drilling rig, with two rigs running in Dunn County, ND and one each in the Koala and Smokey Projects in McKenzie County, ND. The company will take delivery of a 5th operated rig in 4Q11. Prior to the offering's close, the company's revolving credit facility borrowing base was increased from $75 million to $110 million, and borrowing under the second lien term increased by $15 million to $55 million. As it stands, Kodiak has $60 million outstanding on its revolver and $55 million on the second lien facility, or $115 million in debt. According to Global Hunter Securities (GHS), the equity raise was expected, given that the company had approximately a $40 million gap between 2011 CF and CAPEX requirements. With the amount of equity raised, GHS believes Kodiak should be self-funding through the foreseeable future assuming the company focuses on a development orientation rather than additional acquisitions in the Williston Basin.

Duff & Phelps acquires Growth Capital Partners

Independent financial advisory and investment banking services firm Duff & Phelps Corp. has acquired Texas-based, middle-market investment banking firm Growth Capital Partners. The acquisition expands Duff & Phelps' presence in the Southwestern US and complements the firm's expertise in the energy, mining and infrastructure industries. Terms were not disclosed. John T. McNabb, II, chairman, director and a founder of Growth Capital Partners, joins Duff & Phelps as vice chairman of the Investment Banking practice. David W. Sargent, CEO, president, director and a founder of Growth Capital Partners, joins Duff & Phelps to lead the firm's investment banking activity in the Southwest.

VAALCO Energy to purchase additional Bakken acreage

Houston-based VAALCO Energy Inc. has signed a letter of intent with Magellan Petroleum Corp. to acquire and develop an operating working interest in approximately 23,000 net mineral acres of oil, gas and mineral leases covering the Bakken and deeper formations in the East Poplar Unit and the Northwest Poplar Field in Roosevelt County, Montana. VAALCO expects to acquire a 65% working interest in the Bakken and deeper rights of the Poplar Field. VAALCO will operate its deep rights in the subject acreage in return for cash consideration at closing and its funding of 100% of the cost to drill three wells by the end of 2012, including one well by June 1, 2012, at a cost to VAALCO of approximately $5 million per well. Magellan will retain its current ownership for all formations above the Bakken, including the currently producing Charles and Tyler formations and will retain the remaining 35% of the Bakken and deeper rights in partnership with VAALCO.

Halliburton wins contract for Polish shale gas search

Oilfield services firm Halliburton has been awarded an integrated services contract from Chevron for shale natural gas exploration in Poland. Work on Chevron Polska's initial shale gas exploration drilling program is expected to begin in the fourth quarter and the contract award is for three years, with extension opportunities. The plan calls for Halliburton to provide services including drilling services, mud logging, cementing, coiled tubing, slickline services, well testing, completion and hydraulic fracturing. Halliburton will support the project with project management services. Present in Poland for more than 15 years, Halliburton performed the first-ever shale hydraulic fracturing operation in Poland for PGNiG in August 2010.

Rowan sells domestic land drilling fleet

Rowan Companies Inc. has agreed to sell its 30-rig domestic land drilling fleet to a subsidiary of Ensign Energy Services Inc. for $510 million cash plus $30 million in working capital (roughly $17 million per rig). The fleet, mainly in Texas and Louisiana, consists of 24-2,000HP, 3-3,000HP and 3-1,500HP rigs. After-tax proceeds, estimated at nearly $370 million, are expected to be redeployed into the company's offshore drilling business and deepwater expansion. In addition to two high-specification jack-ups under construction to be delivered later this year, the company is anticipating the delivery of two high-specification drillships in late 2013 and mid-2014. These are in addition to the fleet of 29 jackup drilling rigs the company will continue to own and operate following the sale. As for Calgary, Alberta-based Ensign, the company will add the acquired rigs to its existing global fleet of over 300 land rigs.

Hilcorp to buy Chevron's Cook Inlet assets

In a deal with Alaskan Chevron subsidiary Unocal, private operator Hilcorp has acquired Cook Inlet oil and gas assets for an undisclosed sum.The deal includes Unocal's interests in Granite Point, Middle Ground Shoals, Trading Bay and MacArthur River fields as well as 10 offshore platforms, an onshore gas field including the Ninilchik and Beluga River units, and two storage gas facilities. Interests in the Cook Inlet Pipeline Co. and Kenai Kachemak Pipeline LLC are also included. Current net production from the operations is roughly 3,900 bopd and 85 MMcf/d or 4,410 boe/d. Chevron expects to maintain its interest in the North Slope oil fields and a 1.36% interest in the trans-Alaska pipeline system. The deal is expected to close by year-end.

Westmont Resources looks to gain Marcellus leaseholds

Bellevue, Washington-based Westmont Resources Inc. has signed an MOU for the acquisition of an oil and gas leasehold located in the southwest tier of Pennsylvania. The acquisition consists of roughly 252 net acres in Westmoreland County and includes three producing wells drilled to 250 feet and a six-inch steel pipe gathering system. In addition to this MOU, the company is under contract for two additional properties representing another 3,400 net acres of leasehold in the Marcellus.

MJLM adds strategy and operations practice

Houston-based McConnell Jones Lanier & Murphy LLP, one of the largest African-American-owned accounting and consultancy firms in the US, has expanded its consulting and business advisory practice with the addition of the strategy and operations practice. Service lines include: strategy, process excellence, financial analysis, technology enablement, and organizational change. The practice is led by Bobby Dixon, a Harvard MBA with more than 15 years' experience providing strategic consulting services to companies in various industries. Terrence Gee, a former partner at Accenture, provides subject matter expertise, thought leadership, and in depth knowledge of oil and gas markets. Thomas Benford, a Harvard MBA and accomplished manager whose experiences include managing projects at Halliburton and JP Morgan, rounds out the practice's leadership team.

Samson Oil, Chesapeake target Codell sandstone beneath Niobrara

Australia-based Samson Oil & Gas Ltd. has elected to work with US-based natural gas producer Chesapeake Energy in the State 24-63 #10-1H well (25%WI) and the State 24-63 #14-1H (12.5% WI) in Goshen County, Wyoming, USA. The wells, in the Codell sandstone directly underneath the Niobrara formation, are expected to be drilled to a measured depth of 11,447' and 11,272', respectively. The completion in the Codell is expected to also fracture the Niobrara Formation in both wells. "If the Codell works in the northern DJ, which it does in Wattenberg proper, this can de-risk more northern DJ basin acreage and have positive implications and increase overall value for other players in the northern DJ Basin such as GMX, Bill Barrett , Recovery Energy, and Chesapeake Energy," said Global Hunter Securities analysts in a July 5 note to clients.

Magnum Hunter Resources sees credit facility expand

Magnum Hunter Resources Corp. has seen an expansion in its senior bank credit facility. The company's borrowing base under its $250 million senior secured revolving credit facility has been increased by $25 million from $145 million to $170 million. The 17% increase is due to organic growth of the company's existing proved reserve base which includes reserves growth from recent acquisitions of NGAS and NuLoch. The interest rate margin will range from LIBOR plus 2.50% to LIBOR plus 3.50%, depending on the amount drawn. As of June 30, 2011, the company had $139 million debt outstanding under its existing bank credit facility which with cash provides for roughly $32 million of liquidity based on the new borrowing base amount. Management anticipates an additional increase in the borrowing base once a new reserve report is completed. Bank of Montreal serves as the administrative agent, with Capital One NA serving as the Syndication Agent, and Amegy Bank National Association, KeyBank National Association and UBS Securities LLC serving as Documentation Agents. BMO Capital Markets serves as Lead Arranger and Sole Bookrunner. Participating banks include Citibank NA, Credit Suisse AG, Deutsche Bank Trust Co. Americas, and Union Bank NA.

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