As the second quarter of 2011 draws to a close, the Eagle Ford shale play took the headlines. Mitsui & Co has entered into an agreement with Colorado-based SM Energy to acquire a 12.5% interest in non-operated acreage in the play, gaining a net amount of 39,000 acres. The Japanese company will carry 90% of the American’s drilling and completion expenses on its non-producing land until it has spent $680m for the benefit of SM Energy, and has also agreed to pay between $20m and $30m to reimburse past expenditures on related midstream assets.
SM Energy has called this deal the final stage in its Eagle Ford divestiture strategy, following recent sales in Dimmit and La Salle Counties. The divestitures have provided SM with almost $1bn in funds, which it aims to use to accelerate development on the 196,000 Eagle Ford acres it has left (75% operated). Mitsui’s strategy for the past few years has been to create a core business segment with US shale oil and gas assets and gain technical expertise from its partners; Mitsui also holds an interest in the Marcellus play following a 2010 transaction with Anadarko. This is the second high-cost Eagle Ford acquisition by a Japanese company in as many weeks. Mitsui is spending around $18,000 per acre in this acquisition and last week, JGC Corp paid TriTech over $10,000 per acre for 6,300 net acres of undeveloped Eagle Ford land.
It was also a busy week further north in the Bakken play. Kodiak Oil & Gas Corp completed its acquisition of 25,000 net Williston basin acres in McKenzie County, North Dakota, for approx. $87m in cash and stock. The land is close to the company’s core Koala, Smokey and Grizzly project areas, and takes Kodiak’s presence in the basin up to 100,000 acres. MDU Resources and Reliable Energy also acquired Bakken land this week. MDU acquired 20,000 acres in Montana, and Reliable acquired 5,700 net acres over the border in Saskatchewan and Manitoba, both for undisclosed amounts. These acquisitions have brought the total amount spent in the Bakken in the first 6 months of 2011 up to around $1bn.
Away from the shale plays, Denbury Resources was also active this week. The Texas-based company has agreed to acquire the remaining 57.5% working interest not already owned in the Riley Ridge Federal Unit in southwestern Wyoming, and an approximate 33% working interest in an additional 28,000 acres of adjoining mineral leases. The transaction cost was $191m. The Riley Ridge Unit, whilst highly prospective for natural gas, has a large accumulation of CO2, a resource Denbury has been searching for more of as it enters the tertiary stage of developing two Rocky Mountain fields, Bell Creek and Cedar Creek Anticline. Denbury plans to flood these fields with CO2 to enhance recovery, starting with Bell Creek in the next two years.
Outside of the US, it was a big week for Canadian company Parex Resources, who completed its first major acquisition since incorporating in August 2009 following Pluspetrol’s acquisition of Parex’s predecessor Petro Andina. The company has bought four blocks in the Llanos Basin in Colombia, a popular area where almost half of the 2010 Open Round licenses were awarded. Parex’s acquisition, first announced in April, was for $255m, provides immediate cash flow and adds significant production to Parex’s portfolio; The assets currently produce 3,100 boe per day, equivalent to 50% of Parex’s total current production levels from existing assets.
Back in the US, as the battle rages on between Williams and Energy Transfer Equity LP over the acquisition of pipeline company Southern Union Company, more midstream acquisitions have taken place this week. The biggest of them is El Paso Pipeline Partners’ $780m combined acquisition of a 28% interest in Colorado Interstate Gas Company and the remaining 15% that it did not previously own of Southern Natural Gas Company from El Paso Corp. This allows the company to strengthen its position in key areas and makes Southern Natural Gas Company a wholly owned subsidiary. Whilst it is selling the companies, El Paso Corp will retain cash flow from them due to its general partner stake in El Paso Pipeline Partners.
Sunoco Logistics Partners LP has been similarly active this week, acquiring the Eagle Point Tank Farm and related assets in New Jersey for $100m from its own general partner, Sunoco Inc. The midstream-focused Limited Partnership also acquired refined products storage terminal facilities from ConocoPhillips for $56m plus inventory costs in Boston, Massachusetts.
Top Deals of the Week
|Acquirer||Target Company||Target Business Segment||Brief Description||Total Acquisition Cost (000)|
|El Paso Pipeline Partners||Colorado Interstate Gas Company; Southern Natural Gas Company||Midstream||El Paso Pipeline Partners acquires an additional 28% in Colorado Interstate Gas Company, and the remaining 15% that it does not own of Southern Natural Gas Company. Both stakes acquired from El Paso Corp.||745,000|
|Mitsui & Co||SM Energy Company||E&P||SM Energy to be carried for 90-100% of its non-operated Eagle Ford acreage by a subsidiary of Mitsui & Co, who will gain a 12.5% interest in the acreage||705,000|
|Denbury Resources Inc||Cimarex Energy||E&P||Denbury Resources acquires a 57.5% working interest in the Riley Ridge Federal Unit located in southwestern Wyoming||176,000|
|Sunoco Logistics Partners L.P.||Sunoco||Midstream||Sunoco Logistics Partners LP acquires Eagle Point tank farm and related assets, located in Westville, N.J||100,000|
|Sunoco Logistics Partners L.P.||ConocoPhillips||Midstream||Sunoco Logistics Partners LP acquires a refined products terminal located in East Boston from ConocoPhillips||56,000|
|Unspecified||Spartan Oil Corp||E&P||Spartan disposes of non-core assets located in southwest Saskatchewan||21,517|
|President Petroleum Company Plc||Tripetrol Oil Trading Inc||E&P||President Petroleum acquires 50% working interest in the CNO-8 “Puesto Guardian” License in Salta Province, Argentina||14,263|
|Unspecified||Wrangler West Energy Corp||E&P||Wrangler West disposes of crude oil properties in the Grand Forks area of Alberta||5,431|
|MEO Australia Ltd||Transworld Exploration Ltd||E&P||MEO acquires all of the shares in Transworld Seruway Exploration Limited, which is the holder of a 100% participating interest in the offshore Seruway PSC, from Transworld Exploration Limited||5,000|
|MDU Resources Group||Unspecified||E&P||MDU Resources acquires 20,000 additional Bakken Shale acres in Richland County, Montana, increasing its holdings in the play to 90,000 acres for an undisclosed amount.||-|
|Reliable Energy Ltd||Unspecified||E&P||Reliable acquires 7,600 (5,700 net) acres of land in Saskatchewan and Manitoba, the majority of which is centred in the middle of the company’s exsisitng Bakken acreage in the Elkhorn area for an undisclosed amount.||-|