SandRidge, Atinum team up for Mississippian JV

SandRidge Energy Inc., Oklahoma City, (NYSE: SD) has entered a joint venture targeting the Mississippian play in Oklahoma and Kansas with an affiliate of South Korea-based investment firm Atinum Partners Co. Ltd. for $500 million.

Atinum plans to acquire an undivided 13.2% non-operated working interest in approximately 860,000 acres, or approximately 113,000 net acres. The JV area of mutual interest covers substantially all of SandRidge's original Mississippian play area in northern Oklahoma and southern Kansas, other than wells and acreage within the associated spacing units spudded prior to the effective date, and all wells and acreage associated with SandRidge Mississippian Trust I.

Atinum has committed to a drilling carry obligation to pay 13.2% of Sand-Ridge's share of drilling and completion cost for wells drilled in the AMI up to a total amount of $250 million, which is anticipated to occur over three years.

Tudor, Pickering, Holt & Co. is financial advisor to SandRidge and Vinson & Elkins LLP is legal advisor. Barclays Capital is financial advisor to Atinum and Skadden, Arps, Slate, Meagher & Flom LLP is legal advisor.

The deal is expected to close in the fourth quarter.

BreitBurn stockpiles Wyoming assets

BreitBurn Energy Partners LP, Los Angeles, (NASDAQ: BBEP) plans to acquire natural gas and oil producing properties in Wyoming from Cabot Oil & Gas Corp., Houston, (NYSE: COG) for approximately $285 million in cash, its second acquisition in Wyoming in as many months.

The assets are primarily in the Evanston and Green River basins of southwestern Wyoming. Estimated proved reserves are approximately 230 billion cu. ft. equivalent (95% gas), including approximately 136 billion equivalent of estimated proved developed producing reserves. Expected 2012 net production is more than 30 million cu. ft. equivalent per day. The acquisition involves approximately 620 producing wells in 16 fields.

Upside includes more than 90 proven, undeveloped drilling locations and more than 600 additional potential drilling locations. The estimated reserve-life index is approximately 21 years on estimated proved reserves and 12 years on estimated proved developed producing reserves. The deal also includes limited acreage and non-operated interests in Colorado and Utah, representing an exit from these states for Cabot.

Hal Washburn, BreitBurn chief executive, said the acquisition further expands BreitBurn's presence in the Rockies, where the company has operating expertise and where he believes there are numerous additional acquisition opportunities.

BreitBurn will fund the deal with borrowings under its existing bank credit facility. The deal is expected to close by year-end 2011. The effective date is Sept. 1.

BreitBurn also announced a $58-million Wyoming acquisition in Niobrara County, in June.

Barclays Capital analyst Gary Stromberg calculates BreitBurn is paying $1.24 per thousand cu. ft. equivalent of proved reserves, and $9,500 per thousand equivalent per day of production.

Bill Barrett Corp. to buy Niobrara assets

Denver-based Bill Barrett Corp. (NYSE: BBG) plans to acquire properties in the Denver-Julesburg (D-J) Basin targeting Niobrara oil from an affiliate of David Honeycutt's Texas American Resources Co., Austin, Texas, for $150 million.

The assets include an estimated 7 million bbl. of oil equivalent (BOE) net proved reserves, approximately 650 BOE per day net production and approximately 28,000 net acres, primarily on fee lands. Current production is predominantly from the Codell and Niobrara formations.

The acquired properties from TARH E&P Holdings LP are within and near Wattenberg Field and the Hereford area, close to the Colorado-Wyoming border in Weld and Adams counties, Colorado, and Laramie County, Wyoming.

Barrett chairman, chief executive and president Fred Barrett says the company has been assembling a D-J Niobrara oil position for the past two years, with a pro forma position of more than 67,000 net acres. "With this acquisition, we have established a new, sizable D-J play that includes exploitation opportunity within the existing Wattenberg development area and a sizable exploration acreage position, where we intend to test the Niobrara through horizontal drilling this year."

Closing is expected in August. Bill Barrett's preliminary estimate of 2011 capital expenditures associated with the acquisition is up to $35 million.

Randy King and Bill Anderson with Bank of America Merrill Lynch led the advisory team for Texas American.

Texas American is privately held and operates more than 400 wells in Texas, Wyoming and Colorado with 34 million BOE proved and production of 2,500 BOE per day. It plans to use proceeds to pay debt and accelerate development on its oily Eagle Ford and Texas Panhandle assets.

Wells Fargo Securities senior analyst David Tameron calculates a per-acre cost of $2,900 after applying a multiple of $10 per BOE and deducting a reserve value of $70 million. He estimates the deal includes 234 proved undeveloped locations.

Raymond James Equity Research analysts John Freeman and Cory Garcia estimate the metrics at $4,200 per acre after backing out the production value, "which is relatively in line with the Chesapeake Energy Corp.-China National Offshore Oil Corp. (CNOOC) deal in January, at $4,750 per acre." Additionally, the deal also equates to $3.57 per thousand cu. ft. equivalent of proved reserves, slightly cheaper (because it's more gassy) than its recent Uinta purchase at $4 per thousand equivalent of reserves.

Global Hunter Securities analyst Michael Bodino splits the difference. "If $50 million is allocated to production and reserves, unproven acreage would be valued at $3,571 per acre," he says.

Endeavour bulks up on Marcellus; SM sells

Houston-based Endeavour International Corp. (NYSE: END; London: ENDV-l ) plans to acquire leasehold and producing interests held by SM Energy Co., Denver, (NYSE: SM) and its partners in the Marcellus shale in north-central Pennsylvania, as well as a pipeline and related facilities, for a total of $110 million.

The deal represents SM's exit from the Marcellus shale; it will receive $80 million for its assets, including the infrastructure holdings.

Endeavour will acquire 100% operated working interests in approximately 50,000 net acres in McKean and Potter counties. Current production from three existing wells is approximately 3- to 4 million cu. ft. of gas per day, including the Potato Creek #3H well that initially flowed 11 million cu. ft. per day. Addi- tionally, Endeavour will acquire 100% ownership of Potato Creek LLC, which owns a midstream gathering system and related facilities in southern McKean County.

SM Energy's assets involve approximately 42,000 net acres as well as associated pipeline holdings. Average first-quarter production from three producing wells was 2 million cu. ft. per day. As of year-end 2010, booked reserves totaled 5.6 billion cu. ft. equivalent, of which 50% were classified as proved developed.

Pro forma, Endeavour's leasehold interests in the Marcellus shale will total approximately 93,000 gross (68,000 net) acres. The company plans to finance the deal with proceeds from convertible debt securities.

Endeavour estimates recoverable gas potential of from 1- to 1.3 trillion cu. ft., with more than 300 identified drilling locations.

SM Energy recently announced two deals in the Eagle Ford shale, a sale to Statoil ASA, Stavanger, Norway, (NYSE; Oslo: STO; STL) and Talisman Energy Inc., Calgary, (NYSE; Toronto: TLM) for $225 million, and a joint-venture arrangement with Mitsui & Co. Ltd., Tokyo, (Nasdaq: MITSY; Tokyo: 8031) for $750 million.

Bank of America Merrill Lynch is advisor to SM Energy. The effective date is April 1, 2011. Closing is expected in the fourth quarter.

Pritchard Capital Partners senior research analyst Stephen Berman estimates Endeavour is paying $2,000 per acre after backing out proved reserves.

For the SM Energy portion, Jefferies & Co. Inc. analyst Subash Chandra calculates the deal at $1,900 per acre, noting the assets featured limited production and reserves. "Nineteen-hundred dollars per acre is considerably below our original expectation of $4,000 per acre," he says.

"However, due to the length of time it took to complete this transaction (about one year), we believe expectations for this non-core acreage have largely been diminished and the sale will be considered a net positive."

CNOOC Ltd. subsidiary to acquire Canada's OPTI

CNOOC Luxembourg Sarl, a subsidiary of CNOOC Ltd., Hong Kong, (NYSE: CEO) plans to acquire OPTI Canada Inc., Calgary, (Toronto: OPC) for approximately US$2.1 billion.

CNOOC will play US$1.25 billion in cash and assume US$825 million in debt.

The principal asset of OPTI consists of a 35% working interest in the Long Lake and three other project areas in the Athabasca region of northeastern Alberta. The Long Lake project includes steam-assisted gravity-drainage (SAGD) operations and an upgrader. Nexen Inc. holds the remaining 65% and is the sole operator. The Long Lake SAGD operation is expected to have through-put rate of approximately 72,000 bbl. per day of bitumen at full production. It is anticipated that the Long Lake upgrader will ultimately produce some 58,500 bbl. per day of products, primarily premium sweet crude.

OPTI's working interest share, before royalties, of raw bitumen reserves and resources on its oil sands leases is estimated to be 195 million bbl. of proved reserves, 534 million bbl. of probable reserves, 1,100 million bbl. of contingent resources and 335 million bbl. of prospective resources. These reserves and resources are estimated to be sufficient to support approximately 430,000 bbl. per day (150,000 bbl. per day net to OPTI) of bitumen production.

Pro forma, OPTI will become an indirect wholly owned subsidiary of the company. All existing options, warrants and other rights to purchase OPTI shares will be cancelled.

CNOOC's financial advisors are BMO Capital Markets and CIBC World Markets. The company's legal advisor is Gowling Lafleur Henderson LLP.

Hilcorp to buy Chevron's Cook Inlet assets

Houston-based, privately-held E&P Hilcorp Energy Co. plans to acquire the Alaskan Cook Inlet assets held by Union Oil Co. of California, a subsidiary of Chevron Corp., San Ramon, Calif., (NYSE: CVX) for an undisclosed price.

The assets include interests in the Granite Point, Middle Ground shoals, Trading Bay and MacArthur River fields; interests in 10 offshore platforms; interests in onshore gas fields, including the Ninilchik Unit and the Beluga River Unit; and two gas-storage facilities. Current net production from these assets is approximately 3,900 bbl. of oil and 85 million cu. ft. of natural gas per day.

Additionally, the sale includes interests in the Cook Inlet Pipe Line Co. and Kenai Kachemak Pipeline LLC.

Chevron will retain its non-operated joint-venture interests on the Alaska North Slope and its 1.36% interest in the Trans Alaska Pipeline System.

The deal is expected to close by yearend.

Hilcorp recently sold its Eagle Ford shale assets, of which it held a 60% interest with private-equity firm Kohlberg Kravis Roberts & Co., for $3.5 billion to Marathon Oil Corp., Houston (NYSE: MRO).

ConocoPhillips enters Niobrara in acreage deal

ConocoPhillips, Houston, (NYSE: COP) plans to acquire up to 46,000 net acres in Colorado's Niobrara play from privately held Lario Oil & Gas Co., Wichita, Kan., for an undisclosed price.

The acreage is in Arapahoe, Adams, Elbert and Douglas counties, south and east of the greater Denver metroplex.

ConocoPhillips will be operator and plans to begin drilling test wells in the near future.

ConocoPhillips earlier announced it plans to separate its exploration and production business from its refining and marketing business, making it the U.S.' largest pure-play E&P.

M&A news

Toreador Resources Corp., Paris, (Nasdaq: TRGL; Paris: TOR) plans to merge with privately held, Houston-based ZaZa Energy LLC to create ZaZa Energy Corp.

The new company will be based in Houston with offices in Corpus Christi, Texas, and Paris, and is expected to trade on Nasdaq as ZAZA. ZaZa shareholders will receive $50 million in notes or cash and 76.2 million shares of the new combined company, representing 75% of shares outstanding. Toreador shareholders will receive approximately 25.4 million shares, representing 25% of the new company. Based on Toreador's closing price on Aug. 9, the implied market capitalization for the combined company is approximately $294 million.

The combined portfolio comprises three areas—the Eagle Ford core and the Eagle Ford/Woodbine (Eaglebine) resource plays in Texas and the Paris Basin, with a current total of 423,000 net acres. Both the Eagle Ford and Paris Basin businesses have strategic partnerships with subsidiaries of Hess Corp., New York (NYSE: HES).

In the Eagle Ford core, ZaZa holds 123,000 gross acres and the joint-venture work program forecasts more than 280 wells drilled by the end of 2013. In the Eaglebine, leasing is under way to expand the existing 70,000 gross acres to more than 100,000 gross acres within the next 12 months. ZaZa is in discussions with potential JV partners for the Eaglebine acreage and plans to spud a first well by first-quarter 2012.

In the Paris Basin, Toreador has a one-rig oil exploration drilling program targeting traditional reservoirs expected to commence by late 2011. The Liassic drilling program comprising six wells (without the use of hydraulic fracturing) is expected to commence by year-end, pending final review of permits by the French Administration.

Net production in the Eagle Ford core and the Paris Basin is expected to exceed 1,100 bbl. of oil equivalent per day by year-end 2011, increasing to 5,000 bbl. equivalent per day by the end of 2013, excluding any contribution from future drilling in the Eaglebine, Paris Basin conventional or Liassic. Toreador's conventional proved reserves were 5.5 million bbl. of oil as of yearend 2010.

The deal is expected to close during the fourth quarter.

Williston Hunter ND LLC, a subsidiary of Magnum Hunter Resources

Corp., Houston, (NYSE: MHR) plans to acquire operated working interest in leases and wells in North Dakota from an undisclosed, privately held company for $57 million in cash and stock.

Magnum Hunter will pay $55 million in cash and has issued $2 million in restricted stock to the private company.

The assets include oil and gas mineral leases and 191 wells on approximately 15,500 gross acres within four counties of the Williston Basin. The seller will retain an overriding royalty interest in certain of the properties in various amounts not to exceed 2%.

Gross production is approximately 833 bbl. of oil equivalent per day. Total proved reserves are estimated at 2.6 million bbl. equivalent.

Magnum Hunter presently owns an approximate 47% working interest in these properties. Pro forma, the company will own a 95% working interest in the properties.

Magnum Hunter plans to fund the cash portion of this purchase through existing liquidity and borrowings under the company's senior credit facility.

The effective date is April 1. The deal was expected to close by Aug. 18.

W&T Offshore Inc., Houston, (NYSE: WTI) has acquired the 64.3% interest in Fairway Field and a 64.3% interest in the associated Yellowhammer gas-processing plant from Shell Offshore, a subsidiary of Royal Dutch Shell Plc, The Hague, The Netherlands, (NYSE: RDS) for $36.7 million.

This acquisition was part of a larger transaction between Shell and W&T for three Gulf of Mexico deepwater producing fields known as Tahoe, SE Tahoe, and Droshky. That in turn is part of a larger six-field deal W&T entered into with Shell in November 2010 for $450 million.

Fairway Field is in the shallow state waters south of Mobile Bay, Ala., and the Yellowhammer plant is onshore Alabama about 17 miles northwest of the field.

Production net to W&T's interest in Fairway Field is approximately 19.5 million cu. ft. of gas and 1,200 bbl. of gas liquids per day for a total of 26.9 million cu. ft. of gas equivalent per day.

Proved reserves as of June 30 were 39.4 billion cu. ft. of gas and 2.5 million bbl. of gas liquids for a total 54.5 billion cu. ft. equivalent.

—Compiled by Stephen Payne

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