Noble Energy made a major move into the Marcellus shale play this week in a $3.4 billion joint venture with CONSOL Energy. The deal was split into two transactions, with a 50% interest in the proved developed portion of CONSOL’s Marcellus play portfolio swapping hands for $219 million and a 50% interest in CONSOL’s 663,000 acres of undeveloped land in the play costing $3.2 billion. The undeveloped acreage acquisition is structured as a $1.07 billion upfront cash payment and a further $2.13 billion in the form of a cost carry, which is anticipated to extend over an 8 year period.
The cost for the undeveloped portion of acreage equates to $9,650 per acre, although after taking into account the present value (assuming a 10% discount rate) Noble Energy reports this figure as $7,100 per acre. Noble Energy has also managed to mitigate a portion of the risk posed by the currently supressed US gas prices by suspending the disproportionate funding when the price falls below $4 per btu. The deal is the largest for Noble since their acquisition of Patina Oil & Gas in 2005 for the same price of $3.4 billion, whilst for CONSOL the cash payment will strengthen a balance sheet that carried significant debt following large recent acquisitions from Dominion Petroleum and CNX Gas.
In the past two years the average price for an undeveloped Marcellus shale play acre has traded at $5,500 and it was clear from the share price impact for each company who the market thought got the better end of the deal. CONSOL Energy gained 8.8%, which contrasted with a 3% drop for Noble Energy following the deal announcement. The reaction from the Noble Energy’s shareholders is likely to have been further fuelled by another turbulent week on the equity markets on the back of further negative sentiment towards the state of the global economy, and a widespread aversion to risk even with almost non-existent interest rates across the major western economies offering attractive borrowing costs.
Despite the negatives the tie-up has the potential to contribute 600mcfe/d of production net to Noble by 2015 and with the location of the play next to the major markets the low transportation costs means the play can be economic at a lower gas price relative to mid-continent plays. Also the acreage is 20% “wet gas” which is likely to boost the average price realisations.
Other than the Noble-CONSOL joint venture it was an uneventful week for E&P deals with the next largest transaction coming from Swift Energy’s $53.5 million divestment of non-core US properties. With the assets containing 92.2 bcfe (15.37 million boe) of proved reserves, the cost equates to $3.48 per boe, a figure which is usually more akin to risked assets in unstable countries as opposed to a producing asset in the US, which although gas weighted still contains 35% liquids.
In the refining sector, San Miguel, traditionally a food and beverage company expanded on its refining and marketing division by acquiring ExxonMobil’s downstream assets in Malaysia for $610 million. San Miguel had previously entered the sector when they acquired a majority stake in Philippine’s largest refining company Petron during 2010. The acquisition will mark the company’s first non-food and beverage deal outside of its home country in the Philippines and will compose of a 65% in the 88,000 b/d Port Dickson refinery and 560 service stations.
|Acquirer||Target Company||Target Business Segment||Brief Description||Total Acquisition Cost ($000)|
|Noble Energy||CONSOL Energy Inc||E&P||Noble Energy enters multi-billion dollar joint venture with CONSOL Energy which will see Noble take a 50% interest in 50% of CONSOL’s 663,350 Marcellus Shale acres in Pennsylvania and West Virginia||3,200,000|
|Transocean||Aker Drilling||Oil Services||Transocean acquires Aker Drilling, a fully integrated Norwegian offshore drilling contractor||2,261,182|
|San Miguel Corporation||ExxonMobil||R&M||San Miguel Corp acquires the Malaysian downstream assets of ExxonMobil||610,000|
|Noble Energy||CONSOL Energy Inc||E&P||Noble Energy acquires CONSOL Energy’s proved developed producing reserves and gathering assets in the Marcellus shale for $219 million||219,000|
|Hunting PLC||Dearborn Precision Tubular Products, Inc.||Oil Services||Hunting PLC acquires Dearborn Precision Tubular Products, Inc., a manufacturer of specialist precision machining services used in the oil and gas industry||83,500|
|Unspecified||Swift Energy Co||E&P||Swift Energy divests six fields in South Louisiana, two in Texas and one in Alabama for approximately $53.5 million to an undisclosed acquirer||53,500|
|Unspecified||Winstar Resources Ltd.||E&P||Winstar farms out a potential 22.5% interest in the Sabria Concession in west-central Tunisia to an undisclosed acquirer||18,850|
|Wild Stream Exploration||Unspecified||E&P||Wild Stream Exploration acquires 82 sections of land in the Shaunavon and Dodsland plays of Saskatchewan||14,924|
|Strategic American Oil Corporation||SPE Navigation I, LLC||E&P||Strategic American Oil Corp acquires SPE Navigation I, LLC, a private Texas company||11,875|
|Beach Energy||Adelaide Energy Limited||E&P||Beach Energy acquires a 19.95% interest in Adelaide Energy||13,007|
|Drift Lake Resources Inc||Petrodorado Energy Ltd.||E&P||Drift Lake Resources farms into a 30% interest in the 108,336 acre Talora Block located in Colombia’s oil prolific Magdalena Basin from Petrodorado Energy Ltd||9,100|
|Niko Resources Ltd.||Vast Exploration Inc||E&P||Niko Resources acquires a 12% interest in the Qara Dagh Block in the Kurdistan region of Iraq from Vast Exploration||9,000|