Norway's Statoil buys Brigham for Bakken stake

With stakes in the Marcellus and Eagle Ford shales, the Norwegian NOC takes a dominant operated position in a leading U.S. oil play by taking out an investor sweetheart.

Norwegian national oil company Statoil ASA (NYSE: STO; Oslo: STL) is making a move to claim a 375,000-netacre stake in the Bakken and Three Forks tight oil play in North Dakota and Montana via the acquisition of independent producer Brigham Exploration Co., Austin, Texas, (Nasdaq: BEXP) for a total deal value of $4.7 billion.

Statoil will pay US$36.5 per share in an all-cash deal, a 36% premium over an average of the last 30 trading days and 20% above close of trading Oct. 14. Statoil will also assume approximately $300 million of Brigham debt.

“The U.S. unconventional plays hold a substantial resource base and represent an increasingly important part of future energy supplies,” says Statoil president and chief executive Helge Lund. “Entering the Bakken and Three Forks tight oil plays and taking on operatorship represents a new significant step for Statoil.”

Brigham currently holds some 375,800 net acres in the Williston Basin with production of 21,000 barrels of oil per day, with the potential to escalate to 60,000 to 100,000 BOE per day within five years, according to Statoil’s estimates. With 88 North Dakota wells on production, 24-hour initial production rates have averaged 2,800 BOE per day. Brigham operates 12 rigs in the region with 140 wells planned for 2012. Proved reserves at year-end 2010 were 68 million BOE.

Caris & Co. analyst Gabriele Sorbara values the deal at $12,533 per acre ($9,929 per acre when backing out production valued at $80,000 per BOE per day), $70.31 per proved BOE, and $223,810 per flowing BOE.

Statoil estimates the risked resource base at 300- to 500 million BOE. Wells Fargo Securities analyst David Tameron estimates Statoil is paying $9 to $15 per barrel on risked resource potential. The Brigham transaction also includes approximately 430 miles of oil, natural gas and water transportation systems centrally located in the Williston Basin.

Brigham has positions in an additional 40,000 acres in the onshore Gulf Coast, the Anadarko Basin and the Permian Basin.

Bud Brigham, Brigham Exploration chairman, president and CEO, says a bigger enterprise with a larger balance sheet will be better positioned to take advantage of the company’s large and growing inventory of Williston Basin drilling locations. “We are excited to see this transaction completed and look forward to having our assets and employees integrate with the Statoil organization and the substantial asset position that they are growing in their U.S. onshore business.”

Statoil holds U.S. positions in both the Marcellus and Eagle Ford shales as well, primarily nonoperated. Lund says the company is positioning to be a leading player in the fast-growing U.S. onshore oil and gas industry.

“Brigham has proven itself as a premier operator with a highly attractive position in the Williston Basin,” says Lund. “We are a strong strategic fit, as both companies put a premium on technological innovation and advancement.”

“The transaction reflects the continued hunger of IOCs (international oil companies) and NOCs for exposure to U.S. shale plays,” says Global Hunter Securities analyst Michael Bodino. “This transaction is a big step for Statoil as they enter the Bakken and take on operatorship.”

Brigham, based in Austin, Texas, has more than 100 employees in Austin and North Dakota. Statoil plans to maintain the Austin office with a retention plan for current employees.

“We are impressed by the performance and technological prowess demonstrated by the employees of Brigham and look forward to further responsible development of these world-class assets. We will build on Brigham’s good-neighbor program and continue to engage with local authorities and communities in the Williston Basin area,” says Bill Maloney, executive vice president for Statoil in North America.

Closing is expected by the end of the first quarter 2012.

Tudor, Pickering, Holt & Co. Securities Inc. and Goldman, Sachs & Co. are financial advisors to Statoil. Vinson & Elkins LLP is legal advisor. Jefferies & Co. Inc. is advisor to Brigham.

—Steve Toon

BreitBurn Energy acquires Rockies assets for $283MM

BreitBurn Energy Partners LP, Los Angeles, (NASDAQ: BBEP) has closed the acquisition of gas and oil producing properties in Wyoming, Colorado and Utah from Cabot Oil & Gas Corp., Houston, (NYSE: COG) for approximately $283 million in cash.

The assets are primarily in the Evanston and Green River basins of southwestern Wyoming. The properties total 238,000 gross acres (111,500 net) in Wyoming, 15,000 gross acres (13,000 net) in Colorado and 2,000 gross acres (500 net) in Utah.

The acquisition features approximately 620 producing wells in 16 fields.

Production for 2012 is projected to average more than 30 million cu. ft. of gas equivalent per day.

Estimated proved reserves are approximately 230 billion cu. ft. equivalent (Bcfe) (95% gas), including some 136 Bcfe of estimated proved developed producing reserves. Expected 2012 net production is more than 30 million cu. ft. equivalent per day.

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.

The deal follows a $58-million Wyoming acquisition in Niobrara County in June.

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

SandRidge to sell E TX gas assets to NFR

Privately held, Houston-based NFR Energy LLC plans to acquire certain East Texas natural gas properties from Sand-Ridge Energy Inc., Oklahoma City, (NYSE: SD) for $231 million.

The properties include approximately 25,000 net acres in Gregg, Harrison, Rusk and Panola counties. Average 2011 production is approximately 25 million cu. ft. of gas equivalent per day. Pro forma, SandRidge expects production to be 23.9 million BOE in 2011 and 27.7 million BOE in 2012. SandRidge plans to use the cash proceeds to fund a portion of its oil-focused drilling program.

The deal is expected to close in November.

NFR Energy is principally focused on developing its Haynesville and Cotton Valley assets in East Texas.

Carrizo opens up JV in Eagle Ford to GAIL

A subsidiary of GAIL (India) Ltd., New Delhi, India, (NYSE: GAIL) has entered an unincorporated joint venture in the Texas Eagle Ford shale with Carrizo Oil & Gas Inc., Houston, (Nasdaq: CRZO) for a total $95 million in cash and production costs.

The deal includes $63.65 million in cash and the assumption of an additional $31.35 million of Carrizo’s future drilling and development costs.

Carrizo sold 20% of its interest in approximately 20,200 net mineral acres leased in the condensate zone of the Eagle Ford shale. The assets conveyed to GAIL include approximately 4,040 net acres primarily in La Salle County and a 20% interest in eight horizontal wells.

Production is approximately 1,700 net BOE (340 BOE per day net to GAIL) and 3.8 million cu. ft. per day of rich gas (760,000 cu. ft. net to GAIL). Proved reserves are 13.8 million BOE (2.76 million net to GAIL) with 2.5 million BOE classified as proved developed (500,000 bbl. net to GAIL).

A rig is currently drilling a four-well pad on the joint-venture property, which is expected to be completed and brought on production near the end of this year. Carrizo will continue as operator of these properties, and expects the $31.35 million drilling carry to be fully realized in less than one year.

Carrizo recently entered purchase agreements for additional Eagle Ford acreage not included in the joint venture with GAIL. Pro forma the joint venture and successful closing of the additional deals, Carrizo’s net Eagle Ford shale lease position would approximate 41,000 net acres.

KeyBanc Capital Markets Inc. analyst Jack Aydin says the deal values the property at $16,000 per net acre and production at $65,000 per BOE per day.

“We think Carrizo received a solid price for the acreage considering the valuation is greater than recent Eagle Ford transactions, including SM Energy Co.’s (NYSE: SM) recent divestiture in La Salle County at $14,640 per net acre and the average for recent meaningful transactions in the Eagle Ford at approximately $12,500 per net acre.”

PDC, Lime Rock JV to Buy Marcellus player

PDC Mountaineer LLC, the 50/50 joint venture of Petroleum Development Corp. (dba PDC Energy), Denver, (Nasdaq: PETD) and Lime Rock Partners V LP, an affiliate of Houston-based private-equity firm Lime Rock Partners, plans to acquire the membership interests of privately held, Parkers-burg, W.Va.-based Seneca-Upshur LLC for $152.5 million.

PDC Energy and Lime Rock will each pay $76.25 million of the purchase price.

PDC Mountaineer will acquire all rights and all depths to an estimated 90,000 net acres prospective in the Marcellus shale primarily in Harrison, Tay-lor, Barbour, Upshur, Lewis and Randolph counties of north-central West Virginia. An additional 10,000 net acres are located in Mingo and McDowell counties in southwestern West Virginia, which is prospective for the Huron shale. The acquired acreage has an average working interest of 95% with average royalty burdens of approximately 17%.

The acreage is 100% held by production from shallow Devonian producing wells included in the acquisition. Current production is approximately 5.4 million net cu. ft. per day net, primarily from the shallow Devonian formation, and will be operated by PDC Mountaineer.

Estimated net proved developed producing reserves are 30 billion cu. ft. equivalent and net risked resources are estimated at 1.5 trillion cu. ft. equivalent from approximately 435 gross horizontal Marcellus drilling locations.

A significant portion of the acreage is in close proximity to PDC Mountaineer’s current lease positions in Harrison, Taylor, and Barbour counties, which should provide operational, midstream and marketing synergies to the newly acquired acreage.

The acquisition includes Seneca-Pusher’s field office in Buckhannon, W.Va., and a staff of approximately 33 employees. PDC Mountaineer plans to begin development of the Marcellus on the acquired lands in 2012.

In addition, PDC Mountaineer has expanded its commitment to Equitrans, a subsidiary of EQT Corp., for long-term transport of up to 76 million cu. ft. equivalent per day of Marcellus production. This commitment is in addition to existing pipeline capacity that is currently transporting PDC Mountaineer’s shallow Devonian production.

Pro forma, PDC Mountaineer will have net production from both Marcellus and Devonian of about 24 million cu. ft. equivalent per day. The combined West Virginia Marcellus acreage position will be approximately 140,000 net acres.

The combined West Virginia Marcellus acreage is estimated to contain 2.2 trillion cu. ft. equivalent of net risked resources from an estimated 610 gross horizontal Marcellus drilling locations based on applying an acreage utilization factor of approximately 50%.

PDC Mountaineer is currently operating one Marcellus drilling rig in West Virginia and expects to drill nine wells in 2011. With the addition of the Seneca-Upshur acreage, PDCM plans to operate one full-time rig to drill a total of 20 to 25 horizontal Marcellus wells per year beginning in 2012.

PDC Mountaineer plans to divest its Pennsylvania Marcellus acreage to fund accelerated development of its West Virginia Marcellus assets. The JV currently holds approximately 9,000 net Marcellus acres in Pennsylvania.

PDC Energy expects to fund its net acquisition contribution initially through a drawing under its existing credit facility. The company will seek to sell certain noncore assets to reimburse a portion of the acquisition cost.

The deal was expected to close Oct. 3.

Carrizo, Avista unite for Utica shale JV

Carrizo Oil & Gas Inc., Houston, (Nasdaq: CRZO) and New York-based private-equity firm Avista Capital Partners have entered into a joint venture to acquire and develop acreage in the liquids-rich region of the Utica shale.

The JV has closed on its first acquisition of 15,000 net acres in eastern Ohio and northwestern Pennsylvania at an average cost of less than $1,500 per acre. Carrizo will own an initial 10% interest in the joint-venture properties with Avista owning the remaining 90%. Avista has the right to contribute aggregate funds of up to $130 million to the joint venture, with the ability to raise this amount by an incremental $70 million.

Carrizo holds two purchase options to increase its participating interest to 50% in the properties acquired by the joint venture over the next 18 months. Its purchase options may be exercised at specified increments above acreage cost and associated improvements at any time during the option period.

In the event these purchase options are not exercised, Carrizo will be entitled to share in any cash distributions by Avista to its partners, provided specified return on investment thresholds for Avista’s investment are achieved.

Carrizo will initially act as operator of the joint-venture properties and will provide certain management services to Avista related to the joint venture. M&A news

• Sinopec International Petroleum Exploration & Production Corp., a subsidiary of China Petrochemical Corp. (Sinopec), Beijing, (NYSE: SNP) plans to acquire Daylight Energy Ltd., Calgary, (Toronto: DAY) for approximately C$2.2 billion in cash.

Sinopec will pay C$10.08 per Daylight share.

Daylight has more than 324,000 net acres of oil and gas assets in the Deep Basin of Alberta and northeastern British Columbia. The assets are primarily in the Pembina, Elmworth and West Central areas. Production as of June 30 was approximately 37,000 BOE per day. Proved and probable reserves as of year-end 2010 were 174.2 million BOE.

In 2010, Sinopec entered an agreement to acquire a 9.03% interest in the Canadian oil-sands Syncrude partnership from ConocoPhillips, Houston, (NYSE: COP) for $4.65 billion. The deal received government approval in June of that year.

Canaccord Genuity Corp. and CIBC World Markets Inc. are financial advisors to Daylight. Blake, Cassels & Graydon LLP are legal counsel to Daylight.

Barclays Capital is financial advisor to SIPC. Vinson & Elkins LLP and Bennett Jones LLP are legal counsel to SIPC. The deal is expected to close by the end of December.

• Apache Corp., Houston, (NYSE, Nasdaq: APA) has reported that its subsidiary, Apache North Sea Ltd., has agreed to acquire ExxonMobil’s Mobil North Sea LLC assets — including the Beryl field and related properties—for $1.75 billion.

The fields have current net production of approximately 19,000 bbl. of oil and natural gas liquids and 58 million cu. ft. of gas per day. At year-end 2010, estimated proved reserves totaled 68 million BOE.

The transaction, with a planned close at year-end 2011, is expected to increase Apache’s North Sea production by 54% and proved reserves by 44%.

The assets to be acquired include operated interests in the Beryl, Nevis, Ness, Nevis South, Skene and Buckland fields; operated interest in the Beryl/Brae gas pipeline and the SAGE gas plant; nonoperated interests in the Maclure, Scott and Telford fields; and Benbecula (West of Shetlands) exploration acreage.

Since acquiring Forties Field in the North Sea in 2003, Apache has drilled about 100 development wells, invested $3.2 billion, produced approximately 161 MMBOE—more than the proved reserves at the time of the acquisition—and added an estimated 171 MMBOE in new reserves.

Production from the Mobil North Sea LLC fields will add to the percentage of Apache’s current output that is indexed to the premium Brent crude oil benchmark price.

Apache will take on the ExxonMobil employees currently supporting the former Mobil North Sea LLC assets.

The transaction is subject to regulatory approvals and preferential rights. Apache intends to fund the acquisition with cash.

• Superior Energy Services Inc., New Orleans, (NYSE: SPN) plans to acquire Complete Production Services Inc., Houston, (NYSE: CPX) through a merger valued at approximately $2.35 billion in cash and stock.

Superior will pay $7 cash and issue 0.945 share per Complete Production share. Complete Production has 79.3 million shares outstanding and Superior Energy shares traded at approximately $24 at the time of the announcement. The deal represents a premium of 29% to Complete’s average price for the past two months, according to Superior Energy.

Pro forma closing and the issuance of new Superior shares, Superior shareholders will hold 52% of the merged company and Complete shareholders will hold the remaining 48%. The combined company will retain Superior’s name.

Greenhill & Co. and J.P. Morgan were financial advisors to Su - perior. Jones, Walker, Waechter, Poitevent, Carrere & Denegre LLP is legal advisor to Superior. Credit Suisse Securities (USA) LLC is financial advisor to Complete. Latham & Watkins LLP is legal advisor to Complete. The deal is expected to close by year-end.

• Summit Midstream Partners LLC, Dallas, has entered into a purchase and sale agreement with Encana Oil & Gas (USA) Inc., a subsidiary of Encana Corp., Calgary, (TSX,NYSE: ECA), to acquire natural gas midstream assets located in the Piceance Basin for $590 million.

The acquired assets encompass approximately 260 miles of pipeline and 90,000 horsepower of compression facilities. The assets serve Mamm Creek, Orchard, and South Parachute production in the area around Rifle, Colorado. Currently, the assets are transporting approximately 500 million cu. ft. per day of natural gas under long-term contracts with multiple producers. In addition to the purchase, Summit has committed to build for Encana the midstream infrastructure necessary to support Encana’s emerging Niobrara development.

Separately, Encana has agreed to sell its interest in the Cabin Gas Plant in the Horn River Basin of northeast British Columbia to Enbridge Inc. for approximately C$220 million at closing, which is expected in December 2011. The agreement covers Encana’s interest of approximately 52% in the first two phases of the natural gas processing plant, which has regulatory approval for total processing capacity of 800 million cu. ft. per day.

• Arete Industries Inc., Westminster, Colo., (OTCBB: ARET) plans to acquire certain oil and gas operating properties in Colorado, Kansas, Wyoming and Montana from Englewood, Colo.-based companies Tucker Family Investments LLLP, DNR Oil & Gas Inc. and Tindall Operating Co. for $11 million.

The assets include 91 operating wells, approximately 37,000 gross acres that includes approximately 21,000 net acres under lease, and approximately 250 proved undeveloped locations.

Causey Demgen & Moore Inc. is legal advisor to Arete.

—Compiled by Stephen Payne

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