INDUSTRY BRIEFS

Weatherford to sell engineered chemistry, drilling fluids businesses for $825M

Multinational oilfield service company Weatherford International plc has agreed to sell its engineered chemistry and integrity drilling fluids business to Berkshire Hathaway affiliate The Lubrizol Corp. for $750 million in cash. The price is subject to customary purchase price adjustments, plus a potential increase of $75 million for an earnout that is tied to the post-closing performance of the businesses. Proceeds from the sale will be used to pay down debt. Bernard J. Duroc-Danner, chairman, president and CEO of Weatherford said the agreement is part of the company's previously announced plan to divest the company's non-core businesses. "This transaction brings our realized cash divestiture proceeds to approximately $1.8 billion during 2014 and implies that our net debt will range between $6.6 billion to $6.8 billion at year end 2014," he said. "Operating margin at its "core" business units (Well Construction, Formation Evaluation, Completions, Production, Stimulation) in 3Q14 was said to be 17.9% compared with the "non-core" business margin of only 2.8%. Shedding non-core units should improve overall profitability and provide some much-needed balance sheet flexibility," noted analysts with Oppenheimer following the news. "While recent returns and free cash flow generation have been disappointing, the company is orchestrating a change of culture to focus on profitability and cash generation. This evolution may take longer than some would hope for, but tangible progress has been made as free cash flow is expected to turn positive in 2015 and likely keep the upward momentum into 2016," the analysts continued.

Statoil updates on Wintershall transaction and Snorre project

Statoil has now completed a transaction with Wintershall to farm down in Aasta Hansteen, Asterix, and Polarled, and to exit two assets - the non-core Vega and Gjøa fields - on the Norwegian Continental Shelf (NCS). The transaction will enable Statoil to redeploy US$1.8 billion of capital expenditure for the period from the effective date until the end of 2020. Statoil monetizes on the Aasta Hansteen field development project, while retaining the operatorship and a 51% equity share. The transaction also includes a farm-down in four exploration licenses in the Vøring area. The transaction consists of a cash consideration of US$1.25 billion and a US$50 million consideration contingent on Aasta Hansteen milestones. Subject to government approval, the operatorship for Vega and the Vega unit will be transferred from Statoil to Wintershall. The two companies expect that such operatorship transfer will take place within the end of the first quarter of 2015. In separate news, Statoil also reports that the Snorre partnership has decided to adjust the schedule for the ongoing Snorre 2040 project by postponing the planned date for DG2 from March 2015 to October 2015. There is no change in the timing of the final investment decision (DG3) and production start-up (DG4), which are planned for the fourth quarters of 2016 and 2021, respectively.

Whiting completes Kodiak acquisition

Whiting Petroleum Corp. completed acquisition of Kodiak Oil & Gas Corp. The closing follows the issuance of a final order by the Supreme Court of British Columbia approving the arrangement on December 5, 2014. The all-stock transaction was previously approved by Whiting stockholders and Kodiak securityholders at special meetings held on December 3, 2014. Analysts with Global Hunter Securities Given commented on the stockholder approval. "Given that the deal is an all-stock transaction for the equity, with WLL also assuming the debt, the deal price remains at a valid market valuation in these tough times; and, in our view, the combination of the two remains a very smart move that adds nice value to WLL as the larger, more financially viable company with a strong balance sheet should see multiple expansion in the future as it executes like its larger (and higher valued) peers." And, with the expansion of Whiting's credit facility to $3.5 billion, Whiting will "not only absorb the outstanding balance of KOG's credit facility but also potentially fund any of the KOG bonds that are put to the company going forward," the analysts continued. Based on the closing price of Whiting stock on December 5, 2014, the combined company, one of the largest in the Bakken/Three Forks area, has a market capitalization of approximately $6.2 billion.

ConocoPhillips sets 2015 capital budget 20% lower than 2014

ConocoPhillips set its 2015 capital budget at $13.5 billion, a 20% decrease from 2014. The spending reduction is in line with numerous other US producers in the wake of the November 27 OPEC meeting in which members failed to agree to cut production. While the company plans to defer spending on North American unconventional plays, it did note that development drilling programs in the Eagle Ford and Bakken will contribute to the estimated 3% production growth expected in 2015. Approximately $5 billion is earmarked for development drilling programs compared to the 2014 budget of $6.5 billion. Approximately $4.8 billion is focused on the company's sanctioned major projects. This represents a significant reduction compared to 2014, which included peak spending at the APLNG and Surmont Phase 2 projects. Funding in 2015 will focus on completion of APLNG and Surmont Phase 2, as well as multiple projects in Alaska, Europe and Malaysia. Approximately $1.8 billion is allocated to the company's exploration and appraisal programs, down slightly compared to 2014. This spending will focus on conventional activity in the US Gulf of Mexico, offshore West Africa and Nova Scotia, as well as unconventional activity in North America.

NGL Energy Partners acquires Water Disposal Facilities in Bakken

NGL Energy Partners LP has acquired two salt water disposal facilities from WaterWorks Corral Creek LLC, and Saltwater Disposal Systems LLC, respectively, for a total cost of $34.6 million in cash. The acquisition represents NGL Water Solutions' entrance into the Bakken shale play in North Dakota. These facilities located in McKenzie and Dunn Counties bring NGL's total treatment and disposal capacity throughout the US to approximately 800,000 barrels per day.

Schlumberger to reduce seismic fleet

In response to the current oil price environment, Schlumberger Ltd. plans to reduce the number of its seismic vessels as well as its headcount. At a Cowen Group conference in New York in early December, Schlumberger's president of operations and integration, Patrick Schorn, said the company anticipates $1 billion in related impairment charges and flat sequential revenues and earnings in the fourth quarter. To lower operating costs, Schlumberger will reduce its seismic vessel fleet to nine survey and six source vessels by year-end 2014, from 15 survey and eight source vessels at year-end 2013, which the company expects will bring an $800 million impairment charge in the fourth quarter. Reductions in headcount are expected to result in a pretax charge of approximately $200 million in the fourth quarter.

FTSI completes acquisition of J-W Wireline

FTS International (FTSI) has completed the acquisition of substantially all the assets of J-W Wireline Co. The close increases FTSI's wireline capacity more than tenfold and extends wireline service to all locations where the company currently offers hydraulic fracturing services, including the Permian Basin; Eagle Ford, Marcellus, Utica, and Haynesville shale plays; and various mid-continent plays. The acquisition includes approximately 70 active wireline units, related district operation locations, a manufacturing facility, and a training facility. Wells Fargo Securities served as the exclusive financial advisor to J-W Energy on the transaction.

Samson Oil & Gas updates credit agreement

Samson Oil & Gas Ltd. executed, closed, and updated its credit agreement with Mutual of Omaha Bank to increase the borrowing base of the reserve based lending facility to $19 million, increase the maximum available under the facility to $50 million, and decrease the interest rate to 90-day LIBOR plus 3.25%, which is approximately 3.48%. The original $25 million facility was initiated in January 2014 and has a current balance of $15.5 million. The additional borrowing base has been developed from the June 30 Proved Reserve report which was estimated by the company's independent reserve engineer to have a value of $54.4 million based on a net present value calculation with 10% discount rate.

Repsol to acquire Talisman for $13B

Repsol SA has agreed to acquire all of the outstanding common shares of Talisman Energy Inc. for US$8.00 (C$9.33) per share in cash. The purchase price for the common shares represents a 75% premium to the seven-day volume weighted average share price and a 60% premium to the 30-day volume weighted average price. Total transaction value is US$13 billion, including Talisman's current debt. The deal will transform Repsol into one of the largest energy groups worldwide, increasing its presence in Organization for Economic Co-operation and Development (OECD) countries and reinforcing its upstream business, which has become the company's growth engine. Talisman will contribute producing and exploration assets in North America (Canada and the US) and Southeast Asia (Indonesia, Malaysia, and Vietnam), as well as in Colombia and Norway, among others. The acquisition will enable Repsol to increase its output 76% to 680,000 boe/d and to boost reserves by 55% to more than 2.3 billion boe. Canada and the US currently make up 10% of Repsol production, and the resulting company will allocate 30% of its capital employed to the region, totaling US$15 billion. The acquisition has been unanimously approved and recommended by the boards of directors of Talisman Energy and Repsol, and is expected to be completed in the second quarter of 2015. The transaction is subject to the approval of the Canadian courts and Talisman shareholders. Goldman Sachs Canada Inc. and Nomura Securities International Inc. are acting as co-financial advisors to Talisman. Norton Rose Fulbright Canada LLP is acting as Canadian legal advisor to Talisman. Wachtell, Lipton, Rosen & Katz is acting as US legal advisor to Talisman. The legal advisor to the Talisman board is Blake, Cassels & Graydon LLP.

Chesapeake closes $4B credit facility

Chesapeake Energy Corp. has closed on a new five-year, $4 billion senior unsecured revolving credit facility. The new facility replaces the existing $4 billion senior secured revolving credit facility that was scheduled to mature in December 2015. The aggregate commitments may be increased up to an additional $1 billion, and the new credit agreement matures Dec. 15, 2019, with two one-year extension options. The new credit facility was led by MUFG Union Bank NA, as administrative agent, co-syndication agent, swingline lender, and letter of credit issuer, and by Wells Fargo Bank NA, as co-syndication agent, swingline lender, and letter of credit issuer. Bank of America NA, Crédit Agricole Corporate and Investment Bank, and JPMorgan Chase Bank NA are co-documentation agents and letter of credit issuers. MUFG Union Bank NA and Wells Fargo Securities LLC served as joint lead arrangers and joint bookrunners.