Noble Energy, Consol JV in Marcellus

Noble Energy Inc., Houston, (NYSE: NBL) plans to enter a $3.4-billion joint-venture partnership with Consol Energy Inc., Pittsburgh, (NYSE: CNX) to develop Consol's Marcellus shale properties in southwestern Pennsylvania and northwestern West Virginia.

Noble Energy will purchase a 50% interest in 663,350 net undeveloped acres for $1.07 billion, fund $2.13 billion of Consol's future drilling and completion costs and acquire a 50% interest in 70 million cu. ft. equivalent per day of existing Marcellus production and infrastructure for $219 million.

The acreage value of $3.2 billion equates to a discounted present value of $7,100 per net acre, according to Noble.

Net production to Noble Energy's interest has the potential to reach 600 million cu. ft. of gas equivalent per day in 2015 and is expected to continue growing into the next decade. The acreage is estimated to contain 7.4 trillion cu. ft. equivalent of risked resources net to Noble's interest, of which 400 billion cu. ft. were proven reserves at year-end 2010.

The assets also feature more than a decade of expected development activity, including drilling of some 4,400 gross well locations. The leasehold position is more than 85% held by production, and almost entirely operated with close to 100% working interest (88% net revenue interests).

A long-term development plan forecasts drilling activity to increase from four to 16 rigs in 2015. Operations are to be shared between the partners, with Noble Energy's initial focus on the wet-gas portion of the acreage. Also, the companies will share midstream infrastructure and access to water-handling capabilities.

Noble chairman and chief executive Charles D. Davidson says, "This transaction will complement and further strengthen our U.S. portfolio by adding a high-quality asset with a substantial growth profile. The Marcellus, combined with our ongoing developments in the D-J Basin and deepwater Gulf of Mexico, will provide important balance to our rapidly expanding international programs. Spreading the transaction costs over an extended time horizon creates better partner alignment on investment decisions and maintains our strong balance sheet."

Consol chairman and chief executive J. Brett Harvey says, "Noble Energy is a world-class operator that shares Con-sol's dedication to safety and compliance and they bring a strong technical and operational expertise to this partnership."

Noble is expected to fund the deal with cash on hand and its revolving credit facility.

Jefferies & Co. Inc. is financial advisor to Consol. Vinson & Elkins LLP and Wachtell, Lipton, Rosen & Katz are legal advisors to Consol. Porter Hedges LLP is legal advisor to Noble.

The deal was expected to close in late September.

Tudor, Pickering, Holt & Co. analyst Dave Pursell values the deal at $10,200 per acre, undiscounted.

"Balance is important at Noble and this deal balances the company's portfolio of domestic/international; lower-risk development/higher risk exploration," says Pursell.

"Noble paid a fair price pre-acceleration at $7,100 per acre. As they accelerate we see the value accreting toward $9,000 per acre."

Pursell adds Tudor Pickering's discounted development values for the 15 companies with Marcellus acreage that the firm follows have an average value of $8,100 per acre with a median value of $6,900 per acre.

Hess scores another Utica shale position

Hess Corp., New York, (NYSE: HES) has acquired The Woodlands, Texas-based Marquette Exploration LLC and additional leases in Ohio's Utica shale for approximately $750 million.

The deal boosts Hess' acreage position in Ohio by 85,000 net acres. The leases, in which Hess will have a 100% working interest, are in Jefferson, Harrison and Belmont counties.

Hess chairman and chief executive John Hess says, "With these transactions, we have built a strategic acreage position in the Utica shale, allowing us to strengthen our portfolio of unconventional resources in high-quality assets, leverage our operating expertise and create significant potential for future growth in reserves and production."

Hess plans appraisal activities on the Utica acreage to commence in the fourth quarter.

Along with the Ohio assets, Marquette owned a contiguous acreage position of over 18,000 undeveloped net acres in Bienville, Jackson and Lincoln parishes in northern Louisiana. Marquette operated two producing Hosston wells on this acreage, the Davis Bros 27-1 and the Davis Bros. 34-1.

Marquette Exploration was founded in 2006 in partnership with Encap Investments LP. President Richard Wilken has more than 20 years experience in the energy industry, beginning with Conoco in 1990 as a geophysicist working Midcontinent development projects and later Gulf Coast exploration. Prior to joining Marquette, he was Western U.S. exploration manager for ConocoPhillips.

Vice presidents Gerald P. Zieche, James B. Shepherd III and Terry J. Huchton also have years of experience in the industry including working with Wilken at Burlington Resources and ConocoPhillips.

This latest deal follows Hess' recently announced 50-50 joint venture with Consol Energy Inc., New York, (NYSE: CNX) to develop Utica shale operations in eastern Ohio for $593 million. In that deal, Hess will pay $59 million at closing and 50% of Consol's working interest obligations relating to certain drilling and completion costs, up to total payments of approximately $534 million, as the acreage is developed. The deal is valued at $6,000 per net acre, according to Consol.

The joint venture will have Hess generally operate in the liquids-rich window, which contains approximately 80,000 acres in Belmont, Harrison, Guernsey and Jefferson counties, and Consol will generally operate elsewhere in eastern Ohio, including Portage, Tuscarawas, and Mahoning counties, in the oil window, and in Noble County.

Consol and Hess anticipate initial drilling operations in the fall, and will thereafter average two rigs in 2012, 3.5 rigs in 2013, and eventually plateau at an average of five rigs in 2015. The carry is expected to be fully utilized by year-end 2016.

The transaction excludes Consol's shallow rights in Ohio and its remaining Utica shale acreage in Pennsylvania and West Virginia. The deal is expected to close by Oct. 21.

Jefferies & Co. Inc. is financial advisor to Consol. Vinson & Elkins LLP and Wachtell, Lipton, Rosen & Katz are legal advisors to Consol.

QR Energy beefs up in Permian, Ark-La-Tex

QR Energy LP, Houston, (NYSE: QRE) plans to acquire oil and gas properties from its sponsor, Quantum Resources Fund, which is managed by Houston-based private-equity fund Quantum Energy Partners, for $577 million in cash and debt.

QR Energy will issue $350 million of convertible preferred units to Quantum Resources Fund and pay $227 million in cash from borrowings in its existing bank credit facility.

The assets include properties in existing core areas in the Permian Basin, Ark-La-Tex and Midcontinent. The properties feature 1,574 gross (960 net) producing oil and gas wells on approximately 109,305 net acres concentrated in Texas, Oklahoma and New Mexico.

Net production for the fourth quarter is projected to be 8,000 bbl. of oil equivalent (BOE). Proved reserves as of Oct. 1 are approximately 37.1 million BOE (65% proved developed, 41% liquids).

Upside includes numerous low-risk development opportunities.

QR Energy chief executive Alan L. Smith says, "This acquisition from our sponsor has assets that fit our investment criteria of mature, longer life properties and more than doubles QR Energy's production and reserves.

"The properties are located in our existing core areas and offer an inventory of low-risk development projects that will supplement our production in the years to come."

The deal is expected to close by October 1.

Venoco CEO makes bid to go private

Venoco Inc., Denver, (NYSE: VQ) reports chairman and chief executive Timothy M. Marquez has made a non-binding proposal to acquire all of the remaining outstanding shares of Venoco for approximately $365 million in cash.

Marquez holds 50.3% of Venoco stock and plans to offer $12.50 per share. Venoco has approximately 58.7 million shares outstanding, with the remaining 49.7% not held by Marquez coming to about 29.2 million shares.

Venoco has oil and gas assets with principal properties both onshore and offshore southern California and onshore in California's Sacramento Basin. The company is also pursuing an exploration and development project targeting the onshore Monterey shale formation in southern California.

Production as of June 30 was approximately 17,687 BOE per day. Net proved reserves as of Dec. 31, 2010 were 85.1 million BOE.

In response to the bid, Venoco's board is forming a special committee of independent directors, which will be comprised of all of the directors other than Marquez, to consider the proposal.

KeyBanc Capital Markets Inc. analyst Jack N. Aydin says the deal values proved reserves at approximately $14.03 per BOE and production at $68,000 per BOE per day, which he views as being on the "low end of other recent transactions." He adds that the $12.50 cash offer is an 18.8% premium to Key-Banc's hard asset value estimate of Venoco's stock at $10.52 per share.

Aydin says, "Despite the 39% premium that Mr. Marquez is willing to pay from the recent closing price of $8.98/share to take the company private, we believe the take-private price of $12.50 is on the low side. However, we are cognizant of the fact that Mr. Marquez owns a controlling interest of 50.3%, and it is unlikely that a third-party bid could be successful without Mr. Marquez going along. Our concern is whether he gets the financing to accomplish this transaction. At present, we place the odds at 50/50."

Dynamic Offshore buys XTO GOM properties

Privately held, Houston-based Dynamic Offshore Resources LLC has acquired substantially all of the Gulf of Mexico properties of XTO Offshore Inc. and other related subsidiaries of ExxonMobil Corp., Irving, Texas, (NYSE: XOM) for $182.5 million.

The deal includes interests in 79 active leases covering approximately 130,000 net acres on the Gulf of Mexico Shelf. Operated properties comprise more than 90% of the proved reserve value and current production.

Production is more than 7,000 BOE per day. Proved reserves as of July 31 were 13.5 million BOE (40% oil, 72% proved developed).

Tammany buys Itochu's Cieco Energy Ventures

Privately held, Houston-based Tammany Oil & Gas LLC has acquired Cieco Energy Ventures LLC from a subsidiary of Itochu Group, Tokyo, (Tokyo: 8001) for an undisclosed price.

Tammany acquired 100% of the membership interest of Cieco Energy Ventures and is in the process of filing with the BOEMRE to reflect the name change to Tammany Energy Ventures LLC. Cieco Energy Ventures was 100% owned by Itochu subsidiary Cieco Energy (US) Ltd.

The deal includes interests in 12 non-operated oil and gas fields in the Gulf of Mexico.

Tammany president Erich Kraus says, "This acquisition further diversifies our current holdings and expands our offshore presence. We expect to continue our contrarian approach of acquiring and developing oil and gas properties in the Gulf of Mexico Shelf and Gulf Coast areas. In addition to proven reserves, these properties hold numerous upside opportunities."

Transocean Services antes $1.43B for Aker Drilling

Transocean Services AS, Zug, Switzerland, (NYSE: RIG) plans to acquire Aker Drilling, Stavanger, Norway, (Oslo: AKD) for US$1.43 billion in cash.

Transocean will pay US$4.87 (NOK 26.50) per Aker Drilling share, a 62% premium to Aker Drilling's 30-day average price of NOK 16.39 share, according to Transocean.

Aker Drilling provides offshore drilling services to the worldwide oil and gas industry. Its assets include an ultra-deepwater, dual-activity fleet comprised of two harsh environment, semisubmersible drilling rigs on long-term contracts in Norway and two drill-ships being constructed in Korea.

Aker Capital AS, a subsidiary of Aker ASA, and other existing shareholders hold 60.5% of outstanding Aker Drilling shares.

Transocean will fund the deal using existing cash balances and debt facilities. The deal was expected to close in September.

Morgan Stanley and Fearnley Fonds/ Fearnley Offshore are financial advisors to Transocean Services. Wikborg Rein is legal advisor to Transocean Services.

Goldman Sachs International is financial advisor and BA-HR is legal advisor to Aker Drilling.

Technip talks merger with Global Industries

Technip, Paris, (Paris: TEC; NYSE Euronext Paris: TEC) plans to acquire

Global Industries Ltd., Houston, (Nasdaq: GLBL) for approximately US$1.07 billion in cash and debt.

Technip will pay US$8 per Global Industries share, a 55% premium to Global's closing share price on Sept. 9 and a 92% premium to its average closing share price for the 30 trading days ending on Sept. 9. Technip will also assume US$136 million of net debt held by Global Industries.

Global Industries provides subsea services supported by 14 vessels, including two newly built leading-edge SLay vessels, and important geographic positions notably in the Gulf of Mexico (U.S. and Mexican waters), Asia Pacific and the Middle East.

Technip chairman and chief executive Thierry Pilenko says, "The subsea market looks likely in 2011 to show a record amount of orders for our industry and our own backlog at end-June 2011 is above its previous peak. We see that our customers continue to firm up a substantial number of large offshore developments with Brazil, the Gulf of Mexico, West Africa and Asia Pacific leading the way to drive future growth. Our investment in Global Industries substantially expands our addressable market in subsea."

Global CEO John B. Reed noted that Global and Technip share a common view of the promising subsea market, adding that the merger will provide customers with an unrivaled execution capability, combining Technip's leading, integrated subsea capabilities with Global's G1200 and G1201, complementary market presence and skills and knowhow in SLay and heavy lift.

Blackstone Advisory Partners and Tudor, Pickering, Holt & Co. Securities Inc. are financial advisors to Tech-nip and Davis Polk & Wardwell LLP is legal advisor. Simmons & Co. International is financial advisor to Global and Vinson & Elkins LLP is legal advisor.

The deal is expected to close in early 2012.

More M&A news

• Encana Oil & Gas (USA) Inc., a subsidiary of Encana Corp., Calgary, (Toronto, NYSE: ECA) plans to sell a portion of its Piceance natural gas midstream assets in Colorado to a private midstream company for approximately US$590 million.

The Piceance Basin midstream assets provide service to Encana's Mamm Creek, Orchard and South Parachute production in the area around Rifle, Colo., about 180 miles west of Denver. They gather and transport about 500 million cu. ft. per day, and include approximately 260 miles of pipeline and 90,000 horsepower of compression facilities.

Encana has previously announced a number of producing property divestitures, including its Barnett shale play in North Texas, portions of the Jean Marie in northeastern British Columbia and its Carrot Creek assets in Alberta's Deep Basin. The company is on track to meet or exceed $1 billion to $2 billion of net divestitures by year-end.

Encana executive vice president Renee Zemljak says, "Following our Fort Lupton gas plant divestiture earlier this year, this Piceance divestiture represents our second successful step in capturing significant unrecognized value from our midstream assets. We have a strong track record of leading the construction of midstream facilities, which gives us the competitive advantage of being a first mover in the development of natural gas resource plays.

"Once built and operating, the assets may be sold to premium midstream operators, freeing up capital for Encana to redeploy investment into its core business of growing natural gas and liquids production."

Zemljak noted that Encana continues to have interest from prospective purchasers of (its) Cabin Gas Plant in Horn River and Cutbank Ridge midstream assets in Canada.

The deal is expected to close in the fourth quarter.

• Cameron International Corp., Houston, (NYSE: CAM) plans to acquire the LeTourneau Technologies Drillings Systems and Offshore Products divisions from Joy Global Inc., Milwaukee, (Nasdaq: JOYG) for approximately $375 million in cash.

LeTourneau provides drilling equipment and rig designs and components for both the land and offshore rig markets. Products include elevating systems, skidding systems, cranes, top drives, rotary tables, draw works, mud pumps and rig control and power systems. Credit Suisse Securities (USA) LLC is financial advisor to Cameron. Porter Hedges LLP is legal advisor.

The deal is expected to close during the fourth quarter.

• Magnum Hunter Resources Corp., Houston, (NYSE: MHR) reports that its subsidiary Williston Hunter ND LLC planned acquisition of operated working interest in leases and wells in the North Dakota Williston Basin from privately held, Kenmare, N.D.-based Eagle Operating Inc. for $57 million in cash and stock was not completed due to unresolved issues between the parties.

The assets include oil and gas mineral leases and 191 wells on approximately 15,500 gross acres within four counties of the Williston Basin. Eagle Operating was to retain an overriding royalty interest in certain of the properties in various amounts not to exceed 2%. Gross production is approximately 833 BOE per day. Total proved reserves are estimated at 2.6 million BOE.

Pro forma, Magnum Hunter was to own an approximately 95% working interest in the assets.

Magnum Hunter reports Eagle made an intentional and bad faith breach of its obligations in the purchase and sale agreement. Specifically, Magnum Hunter reports three days before the scheduled closing of the deal, Eagle delivered a preliminary settlement statement that was supposed to set forth Eagle's "good faith" estimate of each adjustment to be made to the cash consideration in accordance with the agreement. However, the statement "substantially failed to satisfy the requirements of the (agreement) because it included adjustment items not within the delineated scope of allowable adjustments."

Magnum Hunter has filed a new lawsuit against Eagle in the U.S. District Court for the District of North Dakota (Northwestern Division) asking the court to order Eagle to comply with its obligations under the agreement and complete the sale of the properties to the company on the specific terms outlined in the agreement. Magnum Hunter is also seeking monetary damages, including compensatory, consequential and general damages, for Eagle's material default under the agreement.

The acquisition would have also settled two previous pending lawsuits between the company and Eagle, which litigation is now expected to continue. Magnum Hunter reports the pending litigation does not have any material nature to the company.

• Swift Energy Co., Houston, (NYSE: SFY) plans to sell its interests in six fields in South Louisiana, two in Texas and one in Alabama to an undisclosed private oil and gas company for approximately $53.5 million.

Production from the fields averaged 10.6 million cu. ft. of gas equivalent per day during the first quarter of 2011. Aggregate proved reserves at year-end 2010 were 92.2 billion cu. ft. equivalent (65% gas, 19% proved developed producing).

Swift Energy will use proceeds to fund a portion of its 2011 capex.

The deal is expected to close by mid-October. The effective date is Aug 1.

Wells Fargo Securities estimates the deal value at $5,050 per thousand cu. ft. of gas equivalent per day and $0.58 per thousand cu. ft. equivalent proved.

Wells Fargo Securities senior analyst Michael Hall says, "We projected Swift to outspend by $103 million, or 27% of 2011E cash flow. This transaction is expected to reduce excess spending to approximately $49 million net, or 13% of 2011E cash flow."

• Encore Energy Partners LP, Houston, (NYSE: ENP) has acquired producing oil and gas assets in the Permian Basin of West Texas and plans to acquire assets in Wyoming in two deals for a combined $43.3 million.

Encore acquired the Permian assets from an undisclosed seller for $14.8 million. The properties are 51% proved developed. Production is approximately 115 BOE per day. Net proved reserves are 1.03 million BOE (87% oil and gas liquids).

Encore plans to acquire certain non-operated working interests in producing oil and gas assets in Sweetwater County, Wyoming, from an undisclosed seller for $28.5 million. The assets to be acquired are 90% proved developed.

Production is approximately 880 BOE per day. Proved reserves are 4.175 million BOE (65% gas).

The Wyoming acquisition was expected to close in September.

In conjunction with these deals, Encore has entered new oil and gas hedges covering a substantial portion of the estimated production related to proved developed reserves from these acquisitions for the next several years.

• Hunting Plc, London, (London: HTG) has acquired the business and assets of Houston-based W.L. Doffing LP for US$20.8 million (£12.8 million) in cash.

Doffing is owned by a group of investors, which includes two of Doffing's senior managers.

Doffing provides high precision machining services to the energy industry focusing on equipment used for measurement-while-drilling and logging-while-drilling. The business also holds intellectual property for manufacturing other key components used in the oil and gas wellbore.

The Doffing assets will be added to Hunting's well construction and well completion segments.

• Halliburton, Houston, (NYSE: HAL) has entered into a definitive agreement to acquire Multi-Chem Group LLC. Founded in 1993, Multi-Chem provides oilfield production and completion chemicals and services. The company has provided chemicals and services to more than 30,000 producing oil and natural gas wells across North America.

The acquisition is subject to regulatory approvals and other closing conditions. The parties expect to obtain all required regulatory clearances during the fourth quarter of 2011.

• Hercules Offshore Inc., Houston, (Nasdaq: HERO) has acquired an additional 6.1 million shares of Discovery Offshore S.A. at an average price of NOK9.02 per share. With this latest purchase, Hercules Offshore has invested a total of approximately $34.1 million in Discovery Offshore, and currently holds a 28% ownership interest.

Discovery Offshore is a Luxembourg-based company, focused on ownership of ultra high-specification jackup rigs. It has two ultra high-specification jackup rigs under construction at Keppel FELS in Singapore, with delivery scheduled during the second and fourth quarter of 2013. It also holds options for two additional jackup rigs. Hercules Offshore is overseeing the construction, marketing and operations of rigs owned by Discovery Offshore, as well as performing other corporate administrative functions.

• Vaalco Energy Inc., Houston, (NYSE: EGY) has entered into a definitive agreement with Magellan Petroleum Corp., Portland, Maine, (Nasdaq: MPET) 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.

Under the terms of the agreement, Vaalco has paid Magellan $5 million and committed to spend approximately $15 million to drill three wells.

Vaalco has agreed to drill three wells to the Bakken formation and to formations below the Bakken in the Poplar Field. All three wells will be drilled by the end of 2012 and one well will be drilled on or before June 1, 2012. Of these, one well will be drilled horizontally to test the Bakken formation, one well will be drilled vertically to test the Red River formation, and the third will be targeted at Vaalco's discretion. Under the terms of the definitive agreement, Vaalco will have a 65% working interest in the Bakken and Deep Intervals within the Poplar Field.

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.

• Fox Petroleum Inc., New York, (Pink Sheets: FXPT) has reported that it is acquiring Renfro Energy LLC and Cameron Parish Pipelines LLC.

Renfro Energy LLC is a Dallas, Texas-based limited liability company formed in March 2002 as an asset holding company to house existing oil and gas assets in Texas, Oklahoma and for acquisitions identified in Louisiana.

Renfro Energy and Cameron Parish Pipelines' assets are in the heart of the Johnson Bayou, Louisiana. The Cameron Parish School Board Lease has cumulatively produced over six million barrels of oil since the 1930s.

Additional news

• Sanchez Energy Corp., Houston, filed an initial public offering of its common shares to raise up to $150 million on September 1, 2011. The Houston-based company focuses on exploration, acquisition, and development of unconventional oil and natural gas resources. The company plans to list its shares on the New York Stock Exchange under the symbol "SEN."

Johnson Rice & Co. LLC and Macquarie Capital (USA) Inc. are underwriting the offering. Corporate partners Rob Reedy and James Cowen of Porter Hedges LLP are representing the underwriters.

• SandRidge Permian Trust has closed its initial public offering of 34.5 million common units, including 4,500,000 common units sold pursuant to the exercise of the underwriters' over-allotment option, representing a 66% beneficial interest in the trust.

SandRidge Energy Inc. (NYSE: SD), as sponsor of the trust, owns 4,875,000 common units and 13,125,000 subordinated units convertible into common units. The Trust has a total of 52,500,000 trust units outstanding. The common units trade on the New York Stock Exchange under the symbol PER.

Gross proceeds of the transaction, before the underwriting discount, were $621 million. Before payment of offering expenses, SandRidge received approximately $584 million as partial consideration for the conveyance of the royalty interests held by the Trust.

Morgan Stanley & Co. LLC, Raymond James & Associates Inc., RBC Capital Markets LLC and Wells Fargo Securities LLC served as joint book-running managers of the offering. Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC, Robert W. Baird & Co. Inc., Oppenheimer & Co. Inc., Morgan Keegan & Co. Inc., Sanders Morris Harris Inc., Wunderlich Securities Inc., SunTrust Robinson Humphrey Inc., Johnson Rice & Co. LLC and Tuohy Brothers Investment Research Inc. served as co-managers.

• Global alternative asset manager The Carlyle Group, New York, has reported that its newly-formed energy mezzanine business has closed its first two investments, deploying $40.5 million of mezzanine capital into Core Minerals ($20 million) and Black Raven Energy ($20.5 million), both energy exploration and production companies.

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