Appalachian E&P Carbon Natural Gas Co. (CRBO) has secured $100 million in financial backing from investors including Legacy Texas Bank and simultaneously pulled the trigger on a $20 million acquisition in Tennessee, the company said April 4.
The company’s Tennessee acquisition was made using affiliate Carbon Tennessee Co. LLC to acquire issued and outstanding equity of two seller’s subsidiaries. Sellers were not disclosed.
Carbon’s strategy takes advantage of a hole left by E&Ps that have sidestepped less expensive conventional areas to drill in the Marcellus and Utica shales.
Carbon’s acquired assets include net average production of 3,600 thousand cubic feet of gas equivalent per day (Mcfe/d). Production averages 92% gas. As of Feb. 1, Carbon estimates that the properties contain 20.4 Bcfe of proved developed producing reserves and 3.4 Bcfe of proved developed non-producing reserves.
The deal includes natural gas gathering lines and related compression facilities.
Carbon is headed by Patrick R. McDonald, CEO and director, who also led predecessor Nytis USA, formed in 2004. McDonald also served as president and CEO of Forest Oil Corp. in 2012.
The company intends to continue pursuing acquisitions with its equity commitment, which provides a four-year, $100 million senior secured asset-based revolving credit facility.
Carbon Natural Gas Co. owns working and royalty interests in more than 800 oil and gas wells located in Kentucky, Illinois, Indiana, Ohio, Tennessee and West Virginia.
Carbon conducts most of its oil and natural gas operations through Nytis LLC. Nytis holds an interest in 46 consolidated partnerships.
Carbon collectively owns interests in 2,589 net productive oil and natural gas wells and 466,000 net acres in the Appalachian and Illinois Basin of which 277,000 net acres are undeveloped. The acreage includes oil, gas and/or coalbed methane rights with multiple oil and natural gas objectives, according to a December company presentation.
About 70% of its acreage is held by production and half of its leases do not expire for at least five years. At the end of 2016, the company’s net average production was 14,000 Mcf/d and 250 barrels of oil per day.
On Feb. 15, Carbon entered an agreement with Carbon California Co. LLC to purchase properties in California’s Ventura Basin for about $38.5 million. The Ventura Basin contains mature fields with high gravity, sweet oil which can be developed with conventional methods, the company said.
The company notes in its presentation that “larger E&Ps are abandoning conventional Southern Appalachia to focus on the Marcellus and Utica shale in the north. This creates significant opportunity for Carbon to acquire producing assets in the south, build on existing operations, and consolidate a significant Southern Appalachian position.”
While the Marcellus and Utica are often costly areas to buy, drill and complete wells, the company said the Chattanooga /Lower Huron Shale in the south offers “more reasonable costs, excellent response to horizontal drilling [and a] historical acceptance of drilling and producing” by the community.
The company is listed on the OTC Markets under the symbol 'CRBO.'
Darren Barbee can be reached at dbarbee@hartenergy.com.
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