Chesapeake closes JV with Sinopec

Chesapeake Energy Corp. (NYSE: CHK) closed its previously announced joint venture in the Mississippi Lime with Sinopec International Petroleum Exploration and Production Corp. (NYSE: SNP).

Chesapeake announced in early March that it would sell a 50% undivided interest in about 850,000 acres in northern Oklahoma to Sinopec for some $1.02 billion in cash, 93% of which was paid at closing.

Beijing-based Sinopec's share of the joint venture includes production of some 9,600 bbl. of liquids and 54 million cu. ft. (MMcf) of natural gas per day during first-quarter 2013. All future exploration and development costs in the joint venture will be shared by the companies with no drilling carries. As operator, Chesapeake will conduct all leasing, drilling, completion, operations and marketing activities.

Jefferies & Co. Inc. was financial advisor to Oklahoma City-based Chesapeake on the deal.

Whiting closes sale of Okla. interests to BreitBurn

A subsidiary of Whiting Petroleum Corp. (NYSE: WLL) closed the sale of its interest in Postle and North East Hardesty oil fields in the Oklahoma Panhandle to BreitBurn Energy Partners LP (Nasdaq: BBEP) for some $860 million.

The deal adds some 7,400 bbl. of oil equivalent (BOE) per day in net production to Breitburn's portfolio, about 87% oil and 11% natural gas liquids (NGLs). The estimated reserve life index of 13 years is based on estimated proved reserves of approximately 35 MMBOE as of April 1.

Breitburn is buying additional interests in the assets from other sellers for an additional $30.2 million.

Hal Washburn, BreitBurn's chief executive, said, “We anticipate a decade or more of very low-decline production from these assets, which balances some of our more development-focused acquisitions completed last year. With current production from these properties comprised of 98% liquids, we expect our total net liquids production to increase by over 100% from the fourth quarter of 2012 to the fourth quarter of 2013 and exit 2013 with liquids comprising approximately 63% of our total net production.”

Whiting will continue to operate the assets through Oct. 31. Breitburn Energy Partners is based in Los Angeles. Whiting is based in Denver.

Memorial drops down $606 million in assets

Memorial Production Partners LP (Nasdaq: MEMP) has agreed to acquire certain oil and gas properties from its sponsor, Memorial Resource Development LLC, and affiliates of Natural Gas Partners for $606 million.

The properties are in the Permian Basin, East Texas and the Rockies. The transaction will have an effective date of July 1 and is expected to close in October.

The acquired assets consist of 973 gross (648.6 net) wells on 363,000 gross (136,000 net) acres in Texas, New Mexico, Wyoming and Colorado. MEMP will operate 94% of total proved reserves and 74% of the producing wells. MEMP will acquire 275 billion cu. ft. equivalent (Bcfe) of proved reserves, 48% in the Permian Basin, 31% in East Texas and 21% in the Rockies.

The acquisition will increase MEMP's proved reserves by 36% to more than 1 trillion cu. ft. (Tcf) equivalent and average daily production for May 2013 by 42% to 152 MMcfe per day.

Chinese conglomerate buys Woodbine assets

Woodbine Acquisition LLC plans to sell the majority of its assets to Meidu Holding Co., a publicly traded Chinese conglomerate, in a transaction valued at $535 million.

The deal excludes the Manti Exploration Operating LLC assets purchased in December 2012, which will be transferred to Meidu before closing. The assets on the block have estimated proved reserves of about 28.3 million bbl. of oil equivalent (MMBOE); current production is about 5,000 BOE per day on 15,100 net acres.

Global Hunter Securities said the price reflects “robust acquisition multiples of about $18.90 for each BOE of proved reserves, $107,000 per BOE per day of production and about $35,000 per acre.”

Meidu will assume Woodbine Acquisition's $250 million of 12.5% senior notes and $25-million term loan.

Fort Worth, Texas-based Woodbine Acquisition is a private oil and gas company with producing assets in the Woodbine formation in East Texas. Meidu operates real estate, a commodity trading business and a construction materials division.

Exco closes Haynesville purchase from Chesapeake

Exco Resources Inc. (NYSE: XCO) closed its purchase of producing and undeveloped oil and gas assets in the Haynes ville shale from a subsidiary of Chesapeake Energy Corp. (NYSE: CHK) for $288 million.

The acquisition had an effective date of Jan. 1.

Exco financed the Haynesville acquisition under the company's existing credit agreement. The deal is subject to an affiliate of BG Group Plc's preferential right to acquire 50% of the Haynesville properties.

Exco Resources is based in Dallas.

Piceance, other Colorado assets go to Caerus

PDC Energy Inc. (Nasdaq: PDCE) has sold its Piceance and other noncore Colorado holdings to Caerus Oil and Gas LLC for $185 million.

The assets are about 99% natural gas and include an estimated 85 Bcfe of net proved developed producing reserves as of Dec. 31, 2012. The assets produced approximately 40 MMcfe (net) of natural gas per day in first-quarter 2013.

The effective date for the transaction, which was initially announced in February, is Jan. 1.

James Trimble, president and chief executive of PDC Energy, said the transaction will enable the company to focus on more strategic areas.

“We … plan to redeploy the capital to develop our high-return, liquids-rich Wattenberg and Utica shale horizontal drilling inventory. With the closing, we have completed another major milestone in our transition toward a more liquids-rich asset base. We expect our 2013 production mix to be approximately 54% liquids, which is a significant change from 35% liquids in 2012. We expect to largely fund our 2013 capital program with the proceeds from the sale and internally generated cash flow,” he said.

PDC Energy and privately held Caerus Oil and Gas LLC are Denver-based.

Jones Energy to go public

Jones Energy Inc. launched its initial public offering of 14 million shares at between $17 and $19 per share. In connection with the offering, the underwriters will be granted a 30-day option to purchase up to an additional 2.1 million shares. Jones Energy Inc. has been approved to list its common shares on the New York Stock Exchange under the symbol “JONE.”

J.P. Morgan, Barclays, and Wells Fargo Securities are joint book-running managers. Jefferies; Tudor, Pickering, Holt & Co; and Citigroup are senior co-managers. Capital One Southcoast, Credit Agricole CIB, Mitsubishi UFJ Securities, Morgan Stanley, SunTrust Robinson Humphrey, and Stifel are co-managers.

Jones Energy is a private independent pursuing development, production and acquisition of oil and gas properties in the Anadarko and Arkoma basins. The company is based in Austin, Texas. (For more on Jones, see “Granite Wash Zone Shift” in the October 2012 issue.)

Crestwood to take 50% stake in Wyoming system

A subsidiary of Houston-based Crestwood Midstream Partners LP (NYSE: CMLP) plans to buy a 50% stake in Jackalope Gas Gathering Services LLC from Oklahoma City-based RKI Exploration & Production LLC for about $108 million.

The acquisition is expected to close during third-quarter 2013.

Access Midstream Partners LP, which acquired the other 50% interest from Chesapeake Energy Corp. (NYSE: CHK) in December 2012, will continue to provide field operations and construction management for Jackalope, and Crestwood will assume responsibility for the joint venture's commercial development.

The Jackalope gathering and processing system is being developed to handle rich natural gas from a 311,000-acre area in Converse County, Wyo. The system is currently composed of about 100 miles of gathering pipelines and 9,400 horsepower of compression equipment with near-term plans to install a new gas processing facility and continue the expansion of its gas gathering system, according to Crestwood.

The existing assets and future development are supported by a 20-year gathering and processing agreement with Chesapeake and RKI, under which Jackalope receives cost-of-service based fees with annual redeterminations.

In connection with the acquisition and expected development, GE Energy Financial Services agreed to fund 75% of the acquisition and future capital contributions for Crestwood Niobrara's interest in Jackalope—up to $150 million in preferred equity. The remaining contribution for Crestwood Niobrara's interest will be funded with available borrowing capacity under Crestwood's revolving credit facility.

Statoil takes over Eagle Ford operatorship from Talisman

Statoil ASA (NYSE: STO) in early July assumed operatorship for its eastern Eagle Ford shale assets in Texas.

Statoil entered the Eagle Ford shale in 2010 through a 50-50 joint venture with Talisman Energy USA Inc. Talisman initially acted as operator for the acreage.

Last year, the companies agreed that Statoil, through a phased transition, would take responsibility for operations in the eastern half of the asset. This acreage falls mainly within Live Oak, Karnes, DeWitt and Bee counties. Talisman will continue to operate the western acreage, which is principally in Mc-Mullen, La Salle and Dimmit counties. The joint ownership for the total acreage is not affected by the deal.

Statoil has already taken over operations on three drilling rigs in the Eagle Ford. The company has also assumed responsibility for producing wells, processing facilities, pipelines and infrastructure, and a field office in Runge, Karnes County.

Statoil now operates in all its onshore US asset bases: the Bakken, Marcellus and Eagle Ford shales.

In the Eagle Ford, the company holds 73,000 net acres. Statoil's share of production stands at 20,200 BOE per day from some 300 producing wells.

Statoil has been active in US shale plays since 2008. Production from its positions in the Eagle Ford, Marcellus and Bakken shales is a strong contributor to its North American growth goal of producing more than 500,000 BOE per day in 2020. Globally, it aims to produce 2.5 million BOE per day in 2020.

Statoil ASA, headquartered in Stavanger, Norway, has operations in 35 countries.

Quantum Energy Partners forms Rio Oil and Gas LLC

Private-equity firm Quantum Energy Partners has formed Rio Oil and Gas LLC with Rio's founders, Alan Clemens and Stacey Cude.

Rio will acquire and develop oil and gas assets, primarily focusing on conventional plays in North American basins where the team has experience. Quantum and members of the management team have collectively made capital commitments of more than $300 million to the company.

The Rio team will be led by Clemens as chief executive officer and Cude as president and chief operating officer. Prior to founding Rio, Clemens and Cude were senior members of Quantum's technical team, serving as chief of geology and geophysics and chief of engineering, respectively. Clemens' prior experience includes membership on Southwestern Energy's leadership team, as well as positions with Zilkha Energy and Enron Oil & Gas. Cude previously served on Legado Resources' leadership team and held management positions with Anadarko Petroleum Corp.

Quantum is headquartered in Houston. Rio will be headquartered in The Woodlands, Texas.

Eclipse ups its Ohio holdings

Eclipse Resources I LP has purchased Oxford Oil Co. LLC, an upstream energy company with about 184,000 net acres in Ohio, including the Utica shale, for an undisclosed amount.

Oxford, which was renamed Eclipse Resources Ohio LLC, has about 13.8 Bcfe of proved developed producing reserves.

In conjunction with the acquisition, Eclipse completed a private offering of $300 million of senior unsecured notes. The terms allow the company to sell an additional $100 million over the next 12 months to the note acquirers.

Prior to the acquisition, Eclipse owned about 41,000 net acres in Belmont, Guernsey, Monroe and Noble counties, Ohio, where the largest wells in the Utica shale play have been reported to date. With the acquisition of Oxford, Eclipse now owns about 90,000 net acres in the core Utica shale counties and in Harrison County, Ohio.

Benjamin W. Hulburt, president and chief executive of Eclipse, said the acquisition makes Eclipse one of the largest acreage owners in the core areas of the Utica shale in southeastern Ohio.

“We plan to grow our operated, Utica-focused rig count to up to five horizontal rigs running in the play between now and year-end 2014. We are planning a very active drilling program in Harrison, Guernsey, Noble, Belmont and Monroe counties commencing immediately and continuing for the next several years,” he said.

Eclipse will continue its efforts to enhance its contiguous acreage base.

“While we plan to take a cautious approach to the oil-window portion of the Utica shale play, our 135,000 net acres in that portion of the fairway offer Eclipse tremendous additional upside should the industry prove the economic viability of extracting oil from the Utica shale.

“With the additional equity capital that has been invested in Eclipse Resources from our partner, EnCap Investments, and through our unsecured notes offering, we are very well positioned to develop our assets and expect to realize very significant growth in the near future.”

About 50 new Oxford employees will join Eclipse. With the acquisition, Eclipse now has an established base in Zanesville, Ohio.

RBC Richardson Barr acted as financial advisor to Oxford Oil on the transaction. Jefferies LLC was the exclusive placement agent to Eclipse for the senior notes.

Eclipse is based in State College, Pa.

Cimarex, Chevron to develop Delaware Basin acreage

Cimarex Energy Co. (NYSE: XEC) and Chevron USA Inc., a subsidiary of Chevron Corp., have agreed to jointly develop their combined Delaware Basin acreage in Culberson County, Texas.

Cimarex will operate the joint development, which covers 104,000 acres. Chevron will contribute acreage and pay Cimarex approximately $60 million for a 50% interest in the Cimarex-built Triple Crown gas gathering and processing system and wells drilled on the acreage in 2013. The contract has an eight-year term.

Cimarex chief executive officer Tom Jorden said, “Optimal well placement for both Second Bone Spring wells and longer-lateral Wolfcamp shale tests can now be achieved. We look forward to having Chevron as a partner on what will surely be a legacy asset for Cimarex.“

Cimarex is based in Tulsa, Okla. Chevron's headquarters are in San Ramon, Calif.

More M&A news

  • Isis Energy LLC, a new midstream company focused on transportation, storage and distribution of crude oil and related products, has received a $150-million commitment from EnCap Flatrock Midstream, San Antonio.

Houston-based Isis will serve producers, refiners, traders and other marketers and suppliers by providing rail and waterborne solutions in the U.S. and Canada.

Isis is led by president AJ Brass, who has been involved in the refining, transportation, marketing and distribution of crude and petroleum products for more than 20 years, most recently as president of Gulf Coast Asphalt Co. LLC.

In addition to Brass, the management team includes chief financial officer Jason Goldstein; vice president Joe Mat-tingly Jr.; vice president Kenny Hucker; and vice president and general counsel Dave Hubenak. Brass, Mattingly and Hucker worked together at GCAC in various roles for the past 15 years. After 17 years as an investment banker, Goldstein joined GCAC in 2010 from Blossom Street Capital, where he was a partner. Hubenak joined GCAC in 2012 from Tesco Corp. where he served as deputy general counsel.

Locke Lorde LLP provided legal counsel to Isis Energy. Thompson & Knight LLP served as legal counsel to EnCap Flatrock.

  • GE Oil & Gas (NYSE: GE) closed its purchase of Lufkin Industries Inc. (Nasdaq: LUFK), a provider of artificial lift technologies, for about $3.3 billion.

The deal, originally announced in early April, broadens GE Oil & Gas' artificial lift capabilities to handle a wider variety of well types and technology for production automation and drilling. Lufkin shareholders will receive $88.50 per share in cash for each of their Lufkin shares.

  • Kodiak Oil & Gas (NYSE: KOG) closed on its purchase of 42,000 net acres in the Williston Basin from Liberty Resources for about $732 million.

The announced purchase price for the asset package was $660 million. Post-closing adjustments were $52 million, including $31 million in working capital items and $21 million of cash-flow adjustments to reflect the March 1, 2013, effective date. The company paid an additional $20 million for acquisition costs associated with increased working interests acquired by Liberty subsequent to the effective date.

Kodiak now has about 196,000 net acres in the Williston and is developing its leases with an aggressive drilling program. The deal was funded by the company's recently expanded $1.1-billion credit facility. The additional acreage expands the company's current production by about 5,600 BOE/d to more than 30,000 per day.

Independent analysts said the deal gives Kodiak's current production an important boost.

“This level is a notable milestone as it is the level at which we believe Kodiak becomes essentially cash-flow neutral at its current capex pace using current commodity prices. Most impressive might be that Kodiak was producing just a few thousand barrels a day in 2011,” Wunderlich Securities analysts said.

Kodiak's additional 42,000 net acres are in McKenzie and southern Williams counties, ND The acquired leasehold includes 35 controlled drilling spacing units, based upon 1,280-acre units, and is 90% held by production.

The southern Williams County lands, approximating 14,000 net acres, are adjacent to Kodiak's core Polar area. An additional 25,000 net acres are in McKenzie County west of the company's Koala and Smokey areas. Kodiak will also assume Liberty's contract for one drilling rig, which has 14 months remaining on its term.

Both Kodiak and Liberty Resources are based in Denver.

  • SM Energy Co. (NYSE: SM) plans to sell its Anadarko Basin properties, including its Granite Wash interests.

Production from the assets represents slightly over 9,000 BOE per day (75% natural gas), which is 8% of the company's total production in first-quarter 2013. The company's Anadarko Basin assets include 56,000 net mineral acres. The proceeds will be used to fund strategic projects.

SM Energy Co. is headquartered in Denver.

  • TC PipeLines LP (NYSE: TCP) closed its acquisition of an additional 45% interest in each of Gas Transmission Northwest LLC and Bison Pipeline LLC from subsidiaries of TransCanada Corp. (NYSE: TRP; Toronto: TRP).

The acquisition is expected to be immediately accretive to partnership cash flows and earnings.

The partnership funded the $1.05-billion acquisition with net proceeds of $381 million from its equity offering in May, a new five-year, $500-million term loan from the partnership's syndicate of lenders, $146 million of existing debt from Gas Transmission Northwest and the balance of $23 million drawn from its credit facility.

TC PipeLines LP transports natural gas to market hubs and consuming markets primarily in the western and mid-western US and central Canada. The company is based in Houston.

  • Legacy Reserves LP (Nasdaq: LGCY) closed its purchase of Permian Basin oil properties from Resaca Exploitation Inc., Houston, for $67.9 million. Legacy bought a 95% interest in the properties and is joined by an industry partner who purchased the remaining 5% interest.

Legacy Reserves LP is an independent master limited partnership headquartered in Midland, Texas.

  • Magellan Midstream Partners LP (NYSE: MMP) closed its acquisition of pipeline assets in Texas and New Mexico from Plains All American Pipeline LP (NYSE: PAA).

The pipeline system includes approximately 250 miles of common carrier line transporting refined petroleum products from El Paso, Texas, north to Albuquerque, NM, and south to the US-Mexico border for delivery within Mexico via a third-party pipeline.

Of the previously announced combined purchase price of $190 million, $57 million was allocated to the Texas-New Mexico pipelines, which Magellan funded with cash on hand.

Magellan Midstream Partners is based in Tulsa, Okla. Plains All American LP is based in Houston.

  • Surge Energy Inc. (Toronto: SGY) closed its previously announced C$240-million acquisition of an operated, crude-oil-producing asset in southwestern Saskatchewan. The assets' estimated original oil in place is more than 250 million bbl. with a recovery factor of less than 1.5%. Surge estimates more than 271 gross/264 net lower-risk, development-drilling locations, and full (unbooked) waterflood upside. Concurrent with the deal, Surge increased its bank line from $277 million to $350 million.

Macquarie Capital Markets Canada Ltd. was exclusive financial advisor to Surge, which is based in Calgary.

  • ZaZa Energy LLC, a wholly owned subsidiary of ZaZa Energy Corp. (Nasdaq: ZAZA), entered into a new purchase and sale agreement with an independent third party to sell its remaining Moulton assets in the Eagle Ford for $28.8 million.

The assets include about 10,300 net acres of the company's properties in Fayette, Gonzalez and Lavaca counties, Texas, which the company refers to as its Moulton properties, in the Eagle Ford. As part of the agreement, ZaZa has received a down payment of $1.4 million.

  • Samson Oil & Gas Ltd. (NYSE: SNN), Perth, Australia, agreed to sell its interests in the Roosevelt Project in Montana for $13.53 million in cash to an undisclosed buyer. The deal includes Samson's interest in 30,000 net acres, its interest in the Australia II, Gretel II and Abercombie wells, and leases.

Samson plans to deploy the proceeds into developing its Bakken North Stockyard project in North Dakota.

People news

  • Ben van Beurden will succeed Peter Voser as chief executive of Royal Dutch Shell Plc (NYSE: RDS-A, RDSB) effective Jan. 1, 2014. Voser will leave Shell at the end of March 2014, marking the end of 29 years with the company. Van Beurden has been downstream director since January 2013.
  • SandRidge Energy Inc. (NYSE: SD), Oklahoma City, appointed Eddie LeBlanc executive vice president and chief financial officer. The role was vacated when James Bennett was named chief executive officer and president.

Previously, LeBlanc was chief financial officer at East Resources Inc., PostRock Energy Corp., Ascent Energy Co., Range Resources Corp., and Coho Energy Inc.

  • Robert MacKenzie has joined Iberia Capital Partners as managing director and senior oilfield service analyst. MacKenzie worked for FBR Capital Markets since 2002, establishing its oilfield service and drilling coverage, and was then promoted to co-head the energy group. Prior to that, he served as an associate analyst with Citigroup covering oilfield equipment and services and as an associate analyst with (Capital One) Southcoast Capital. He also spent six years at Schlumberger in field operations and management.

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