INDUSTRY BRIEFS
RANGE RESOURCES QUIETS LEVERAGE CONCERNS WITH $876M NORA SALE
Range Resources Corp. agreed to sell its Nora assets in Virginia to EnerVest Ltd. for $876 million, improving balance sheet metrics and likely alleviating leverage concerns. The divested properties encompass nearly 3,500 operated wells and approximately 460,000 net acres in the Nora/Haysi combined fields, and include midstream assets. Resource potential is estimated at roughly 5-6 tcfe. Third quarter production for the Nora assets was 109 MMcf/d representing 7.5% of Range's net production. Assuming $4,000 per flowing Mcf, Seaport Global Securities values the undeveloped assets at approximately $440 million, "a fair value," the analysts continued in a note to investors following the deal's announcement. By monetizing the assets, the company can "meaningfully delever its balance sheet (we estimate 2015 net debt/EBITDA of 3.2x vs. 4.2x previously), the analysts said, noting that "although Nora receives premium pricing (we estimate Q3's differential of -$0.82 would have been -$0.93 ex-Nora, and Q4's calculated differential could drop to -$0.47 from -$0.38), we think this will be largely offset by lower operating costs and a healthier balance sheet." Raymond James Equity Research analysts said that Range has grown production in the coal bed methane and tight gas properties over the past decade from its initial 15 MMcf/d level, but "given Range's Marcellus acreage, the Nora Field was receiving minimal capital," and selling off the assets offers benefits to the company outside the obvious debt reduction, including expected operating margin improvements stemming from lower operating costs of Range's Marcellus production, and the likelihood that the transaction will free up capital to invest in developing the Utica shale. The company holds 400,000 acres in southwest Pennsylvania, which it considers prospective for the play. According to Raymond James, Range drilled and completed its first well with an EUR of 15 bcf, a second well was drilled with a choke - managed rate of 13 MMcf/d, and a third well is expected to be drilled and completed in the first half of 2016.
SANDRIDGE ACQUIRES NIOBRARA OIL ASSETS FOR $190M
SandRidge Energy Inc. agreed to acquire the assets of EE3 LLC in a privately negotiated transaction for $190 million in cash, pending standard due diligence and post-closing adjustments. The transaction is expected to close in 4Q15. With the acquisition, SandRidge will have a material, derisked Niobrara Shale position in the North Park Basin, Jackson County, Colorado. The purchase includes 16 wells currently producing 1.0 Mboe/d and contains 27 MMboe of incremental proved reserves (82% oil cut). Commenting on the deal in a note to investors days following the announcement, Raymond James analysts acknowledged SandRidge's work to address its over-levered balance sheet and noted that "while the Niobrara acquisition was a surprise given the balance sheet concerns, the market clearly liked the move. While we agree that it's nice to have another asset besides the Miss Lime to direct capital towards, we still see a tough road ahead for the company given near-term commodity headwinds." In that same November 7 note, the analysts cited SandRidge's debt of approximately $4 billion despite the company's efforts addressing $925 million of senior notes over the past six months.
MARATHON TO DIVEST GULF OF MEXICO ASSETS
Marathon Oil Corp. has agreed to sell its operated producing properties in the greater Ewing Bank area and non-operated producing interests in the Petronius and Neptune fields in the Gulf of Mexico for $205 million. The buyer will assume all future abandonment obligations for the acquired assets. These assets represent a majority of the company's operated and non-operated producing properties in the Gulf of Mexico. Marathon Oil will retain its interests in certain other producing assets and acreage in the Gulf of Mexico, as well as its interests in the Gunflint development and Shenandoah discovery. Seaport Global Securities noted that the company's majority exit from the Gulf of Mexico "underscores its tightening focus on onshore US resource development," noting that while the "price received isn't pretty ($12K/flowing boe based on figures from the FY14 10-Q)," net of AROs (which are not quantified) and higher unit LOE costs, "we think it makes sense for the company to shed these assets." The effective date of the transaction is Jan. 1, 2015. Closing is expected before year end.
AETHON CLOSES SECOND PRIVATE EQUITY FUND
Aethon Energy Management LLC, a Dallas-based private investment firm focused on onshore oil and gas, has closed its second energy private equity fund, Aethon II LP. Together with co-investments, Aethon's recent fundraising represents $240 million in total capital commitments. Concurrent with this final closing of the fund, Aethon has fully invested the capital it raised. Aethon was founded in 1990 by Albert Huddleston to acquire and develop oil and gas assets in North America.
STATOIL EXITS ALASKA
Statoil will exit Alaska following recent exploration results in neighboring leases. In a statement, the company noted the leases in the Chukchi Sea "are no longer considered competitive within Statoil's global portfolio, so the decision has been made to exit the leases and close the office in Anchorage, Alaska." The decision means Statoil will exit 16 Statoil-operated leases, and its stake in 50 leases operated by ConocoPhillips, all in the Chukchi Sea. The leases were awarded in the 2008 lease sale in Alaska and expire in 2020.
API AND ANGA TO COMBINE
Following approval of both boards of directors, the American Petroleum Institute and America's Natural Gas Alliance announced the two organizations will combine into a single trade association, effective January 1, 2016. The combined association will continue ANGA's mission under API. "As a single organization, the combined skills and capabilities bring an enhanced advocacy strength to natural gas market development - ANGA's primary mission - and the combined association's expanded membership will provide additional lift to API's ongoing efforts on important public policy issues," said API CEO Jack Gerard. Under the agreement, ANGA's mission to promote natural gas as a clean, affordable solution to America's energy and environmental needs will be handled by a new Market Development Group at API, a team led by current ANGA president Marty Durbin. Durbin will hold the title of executive director of market development. ANGA members who are not already members of API will become full members. API and ANGA have long collaborated to highlight environmental, job creation, energy security and consumer benefits from abundant and affordable supplies of natural gas. ANGA was founded in 2009 at the beginning of the shale energy revolution. API is the only national trade association representing all facets of the oil and natural gas industry, which supports 9.8 million US jobs and 8% of the US economy. API's more than 625 members include large integrated companies, as well as exploration and production, refining, marketing, pipeline, and marine businesses, and service and supply firms.
SHELL'S MERGER WITH BG RECEIVES AUSTRALIAN ANTITRUST CLEARANCE
Royal Dutch Shell plc's combination with BG Group plc has received unconditional merger clearance from the Australian Competition and Consumer Commission (ACCC). Together with the previously announced clearances in Brazil and the EU, three of the five preconditions to the combination have now been satisfied. The two remaining pre-conditional clearances are from Australia's Foreign Investment Review Board (FIRB) and China's Ministry of Commerce (MOFCOM). Shell says that the filing process in China continues to progress well and that the merger remains on track for completion in early 2016.
RRC REPORTS TEXAS OIL AND GAS PRODUCTION STATISTICS FOR SEPTEMBER
Production for September 2015 as reported to the Railroad Commission of Texas is 72,849,838 barrels of crude oil and 620,188,919 MCF (thousand cubic feet) of total gas from oil and gas wells. The preliminary figures are based on production volumes reported by operators and will be updated as late and corrected production reports are received. Production reported to the Commission for the same time period last year, September 2014, was: 65,824,450 barrels of crude oil preliminarily, updated to a current figure of 82,786,181 barrels; and 595,603,581 Mcf of total gas preliminarily, updated to a current figure of 712,717,634 Mcf. The Commission reports that in the last 12 months, total Texas reported production was 1.008 billion barrels of crude oil and 8.4 tcf of total gas. Crude oil production reported by the Commission is limited to oil produced from oil leases and does not include condensate, which is reported separately by the Commission. Texas preliminary September 2015 crude oil production averaged 2,428,328 barrels daily, compared to the 2,194,148 barrels daily average of September 2014. Texas preliminary September 2015 total gas production averaged 20,672,964 Mcf/d, compared to the 19,853,453 Mcf/ average of September 2014. Texas production in September 2015 came from 181,179 oil wells and 95,834 gas wells.
HERCULES OFFSHORE EMERGES FROM BANKRUPTCY
Hercules Offshore Inc. has completed its financial restructuring and emerged from Chapter 11, and funding of the company's new $450 million senior secured credit facility has been completed.
ESCALERA RESOURCES FILES CHAPTER 11 RELIEF
Denver, Colorado-based Escalera Resources Co. has filed a voluntary petition in the US Bankruptcy Court for the District of Colorado, seeking relief under the provisions of Chapter 11. Escalera was formerly known as Double Eagle Petroleum Co. Escalera will continue to operate the business as debtors-in-possession under the jurisdiction of the Court. The company has filed a series of first-day motions with the Court that will allow it to continue to conduct business without interruption. In connection with the bankruptcy process, Escalera has an agreement regarding the use of cash collateral. Escalera has 14,296,000 shares of common stock outstanding, which trade on the OTC Market Group's OTC Pink marketplace, and 1,610,000 shares of Series A cumulative preferred stock outstanding (symbol "ESCRP"), which trade on the Nasdaq Capital Market. In November, Escalera requested that its shares be delisted from the Nasdaq stock exchange because the company wasn't meeting the exchange's minimum stockholders' equity requirement. Shares of Escalera haven't traded above $1 since December 2014.
RSP PERMIAN CLOSES MIDLAND BASIN ACQUISITION
RSP Permian Inc. (RSPP) has closed its acquisition of undeveloped acreage and oil and gas producing properties in the Midland Basin from Wolfberry Partners Resources LLC for a purchase price of $137 million. Since August, RSP has acquired approximately 10,700 net acres in the Midland Basin, mostly offsetting or in close proximity to existing operations, and has increased the company's horizontal inventory in its core focus area by over 25%. The deal, in which RSPP purchased 4,100 net acres and 86 net horizontal locations from five zones, brings RSPP's Midland Basin land base close to 63,000 net acres. RSPP is ready to get to work on the newly-acquired acreage, some of which carries drilling obligations (Midland County), said Wunderlich Securities analysts after meeting with the company's CEO in Dallas in November. A rig is expected to move to the acreage acquired following drilling in Glasscock County. "A couple" 10,000 laterals are expected. "The company has navigated this downturn brilliantly, in our view. After two financed high quality acquisitions, RSP emerged with cash on hand, a better debt rating, and an increase in the borrowing base from $500 million to $600 million," Wunderlich Securities analys stated in a note to clients November 13. Tudor, Pickering, Holt & Co. advised Wolfberry Partners Resources on the sale.
SOUTHWESTERN ENERGY ENTERS INTO THREE-YEAR TERM LOAN AGREEMENT
Southwestern Energy Co. has entered into a $750 million three-year term loan agreement and using its proceeds to pay down balances under its existing credit facility and commercial paper program. The term loan is unsecured and includes an interest rate calculated based upon the company's credit rating (currently 137.5 basis points over the current London Interbank Offered Rate). The term loan is prepayable at any time and requires prepayment from the net cash proceeds of any issuance of debt or equity securities and sales of assets, with certain exceptions. The other provisions in the term loan are substantially the same as those contained in the existing revolving credit facility. Analysts with Seaport Global Securities call the deal a modest positive. "Post inking a three-year $750MM term loan, SWN received a nice boost to liquidity and retired the majority of its commercial paper and credit facility borrowings (~$800MM outstanding collectively as of 9/30) under similar financing terms vs. its credit facility. Pro forma for the deal, we estimate that SWN has ample liquidity at $1.97B, and no plans to outspend in FY16. In addition, SWN issued an automatic shelf registration statement to replace its previous shelf (expired 11/13), but does not anticipate specific offerings at this juncture," the analysts noted.
TRANSATLANTIC PETROLEUM TO MARKET ALBANIA ASSETS
Mid-November, TransAtlantic Petroleum Ltd. launched a marketing process for the sale of all of its oil and gas assets and operations in Albania. TransAtlantic's net production as of November 13, 2015 is approximately 6,500 boe/d, and is comprised of approximately 5,800 boe/d from Turkey and 700 b/d from Albania. In a note to clients following the announcement, Seaport Global Securites analysts said the potential move is positive as it "would allow TAT to: (1) stop the bleeding in Albania, the region posted Q3 negative EBITDA of ~$1.5MM; (2) focus on finding partners to help develop its higher return Turkish assets; and (3) reduce debt: TAT currently aims to pay off a significant amount of bank debt by mid-year 2016."
NUTECH TO ACQUIRE EMERALD AND ROCKY MOUNTAIN EXPLORATION WELLS
NuTech Energy Resources Inc. has entered into an agreement to acquire wells from Emerald Operating Co. and Rocky Mountain Exploration Inc. The total operation of the fields comprises 74 producing wells, and their underlying lease agreements. Additionally, NuTech will acquire Emerald's minority non-operator interest in 42 of Mountain Hawk Exploration's wells. Emerald Operating currently has 27 of NuTech Energy's IGOR tools installed on location. Gas from this location is being produced and sold, using NuTech's patented, proprietary Natural Gas Production Technology, but no production results are available as of yet. NuTech Energy Resources has developed a patented technology for the production of coalbed methane (CBM) without the need to pump water. NuTech currently operates wells in the Powder River Basin area of northern Wyoming and has commitments to acquire additional wells.
ENI SELLS REMAINING SHAREHOLDING IN GALP
Eni SpA has sold 33,124,670 ordinary shares of Galp Energia SGPS SA, corresponding to the entire participation held by Eni and equal to approximately 4% of Galp's share capital. The shares were underlying its exchangeable bonds under which the terms of conversion are expired. The shares will be placed with qualified institutional investors with Goldman Sachs International and Merrill Lynch International acting as joint bookrunners. Over the last few months, Eni has completed the disposal on the stock exchange of approximately 4% of the share capital of Galp.Following the completion of the offering, Eni will not hold any participation in Galp's share capital, completing the disposal process of the initial 33.34% stake, sold through several transactions starting from 2012. Proceeds from the offering will be used for general corporate purposes.
FORESTAR LOOKS TO SELL NORTH DAKOTA ASSETS
Forestar Group Inc. has engaged Tudor, Pickering, Holt & Co. to sell Forestar's non-core oil and gas assets in the Bakken and Three Forks formations in North Dakota. Forestar Group's oil and gas segment includes approximately 914,000 net acres of oil and gas mineral interests, with approximately 590,000 acres of fee ownership located principally in Texas, Louisiana, Georgia, and Alabama, and approximately 324,000 net acres of leasehold interests principally located in Nebraska, Kansas, Oklahoma, North Dakota, and Texas. These leasehold interests include about 9,000 net mineral acres in the core of the Bakken and Three Forks formations.
ENCANA COMPLETES HAYNESVILLE ASSET SALE
Encana Oil & Gas (USA) Inc., has completed the sale of its Haynesville natural gas assets, located in northern Louisiana, to GEP Haynesville LLC, a joint venture formed by GeoSouthern Haynesville LP and funds managed by GSO Capital Partners LP. Total cash consideration to Encana is $850 million. Through the transfer of current and future obligations, Encana is reducing its gathering and midstream commitments by $480 million on an undiscounted basis. The transaction has an effective date of Jan. 1. The transaction includes 112,000 net acres of leasehold, plus additional fee mineral lands. Collectively, they represent Encana's total position in northern Louisiana.