This article appeared yesterday in the New York Times: Land Rush in Permian Basin, Where Oil Is Stacked Like a Layer Cake. Exxon announced a $6.6 billion deal to buy the Bass family’s position in the Permian. Noble Energy agreed to buy Clayton Williams Energy for $2.7 billion, acquiring Williams’ 120,000 acres in the Permian. Anadarko announced it is selling its Eagle Ford shale leases to Sanchez Energy and Blackstone Group for $2.3 billion so it can concentrate on developing its leases in the Permian. SM Energy and EOG Resources are also selling assets in other fields to acquire larger interests in the Permian. According to the Times, there have been more than $25 billion of mergers and acquisitions in the Permian since June last year. The frenzy to acquire assets has become known as “Permania.” Companies claim they can make money at as little as $40/bbl. The reason: multiple “stacked” zones in the Permian, principally the Spraberry and Wolfcamp formations, allow multiple wells at different depths on each property.
I read an article today saying that Russia Today has been publishing articles critical of hydraulic fracturing in an effort to suppress U.S. shale production and help Russia regain its footing as the world’s largest gas producer. I had never heard of Russia Today, so I looked it up – on Wikipedia, of course. According to Wikipedia, Russia Today is a news TV and news network owned by the Russian government that operates stations out of Moscow and provides internet content in several languages, including Russian and English. It has been accused of being a propaganda outlet for the Russian government and spreading disinformation – now called “false news.” It has indeed published articles highlighting the alleged environmental dangers of hydraulic fracturing. Russia Today alleges that it has 70 million viewers.
In light of the recent news about Russian interference in the presidential election, it is interesting that the Russian government is also trying to influence U.S. public opinion for its benefit “in plain sight” with its news/propaganda TV and Internet presence.
The Wall Street Journal reported that Sanchez Energy Corp is in talks to buy Anadarko’s leases and production in the Eagle Ford, partnering with Blackstone Group LP, for $3 billion to $3.5 billion. Separately, Sanchez Energy is selling $181 million of “non-core” Eagle Ford leases, about 15,000 acres, to Carrizo Oil & Gas Inc. Carrizo will fund the purchase with sale of 6 million shares of common stock.
The Sanchez-Anadarko deal would be a big bite for Sanchez, which has a market cap of $472 million and $1.7 billion in long-term debt. Sanchez entered the Eagle Ford play by buying Hess’s leases, and in 2014 it bought Shell’s lease position for $639 million. Anadarko’s Eagle Ford leases are principally in Dimmit and Webb Counties, including the Briscoe Ranch, in all more than 1600 producing wells.
Apache has announced that it is sitting on as much as 75 trillion cubic feet of rich gas and 3 billion barrels of oil under 352,000 acres in southern Reeves County. It calls its prospect the “Alpine High.” The hydrocarbons are in a 4-5,000-foot thick segment encompassing 2-3,000 locations in the Woodford, Barnett, and Pennsylvanian formations. So far Apache has drilled 19 wells, and nine have started producing. (Click on image to enlarge.)
Here is the power point presentation by Apache CEO John Christmann at Barclays CEO Energy-Power Conference on September 7: 2016-0907_Barclays_IR_Presentation_vFINAL
Here is the transcript of Christmann’s presentation: 2016-0907_Barclays_IR_Presentation_vFINAL
Chesapeake Energy announced last week that it is selling (giving away?) all of its interest in the Barnett Shale to Saddle Barnett Resources, LLC, a company backed by First Reserve. First Reserve is a global private equity investment firm. The Barnett Shale is the birthplace of the shale revolution in the U.S., and the origin of Chesapeake’s meteoric rise as the premier shale gas producer in the country. A key part of the transaction is Chesapeake’s renegotiation of its gathering agreements with Williams Partners. According to Chesapeake’s press release, renegotiation of the Williams agreements will save Chesapeake $1.9 billion in future midstream and downstream costs. Chesapeake is paying Williams $334 million to get out of the contract, and Saddle Resources is “expected to pay an additional sum.”
The sale covers 215,000 net acres and 2,800 wells producing 65,000 boe per day, 96% of which is natural gas. The deal is projected to save Chesapeake $200 to $300 million annually.
It is difficult to know exactly what this transaction entails without knowing more details, but it looks like Chesapeake is in effect transferring its Barnett leases to Saddle Resources for no consideration, and is in addition paying Williams Partners $334 million to get out of the onerous terms of the gathering/transportation agreement. It also looks like Chesapeake has been operating its Barnett leases at a loss, largely because of the Williams gathering/transportation agreement.
One of the speakers at our firm’s recent oil and gas seminar for land and mineral owners was Chris Atherton, President of EnergyNet, Inc. EnergyNet is an online auction site for oil and gas assets- mineral and leasehold interests. It now controls 75% of the online auction business for oil and gas assets in the U.S.; so far in 2016, it has sold 354 asset packages for $155 million. It makes its money by taking a commission on each sale. Properties are sold both in online auctions and in sealed-bid sales.
Recently, the Texas General Land Office began using EnergyNet for its auctions of oil and gas leases on state lands. It also auctions leases for Colorado, North Dakota, Utah and Wyoming, and it has recently signed up the Bureau of Land Management to conduct lease sales. An example of an EnergyNet offer for lease of a state tract in Loving County, Texas can be viewed here.
One of EnergyNet’s first big deals was sale of a package of 220,000 net mineral acres owned by Chevron in 2003, in dozens of counties in multiple estates. Chevron wanted at least $80 million. By breaking the assets down into smaller parcels, EnergyNet sold them for $120 million.
Stabilis Energy has a facility in George West, about an hour south of San Antonio in the Eagle Ford field, that can produce up to 120,000 gallons of liquified natural gas a day. It opened in March 2015. The US Department of Energy has now given Flint Hills Resources permission to use shipping containers to export Stabilis’s LNG by trucking it to the Texas coast where it can be loaded onto LNG tankers and shipped to other countries.
Other LNG facilities are located along the Texas Gulf Coast. Cheniere Energy recently opened an export terminal for LNG at Sabine Pass in Port Arthur and is building a second facility in the Port of Corpus Christi. Freeport LNG is building an export terminal southwest of Houston, and three other companies are seeing federal permission to build LNG export facilities in the Port of Brownsville.
Haynes and Boone has published a list of the companies who have filed bankruptcy in the current downturn. View it here. 31 of the 63 companies listed are based in Texas. Yesterday Swift Energy, which filed for bankruptcy protection on the last day of 2015, announced that it has emerged from bankruptcy after completing a financial reorganization and selling some assets – the first company on the list to successfully reorganize. The largest E&P companies on the list: Quicksilver Resources, Sabine Oil & Gas, Samson Resources, Energy XXI Ltd., and Energy & Exploration Partners.
Aubrey McClendon, the founder of Chesapeake Energy, died in a car crash last Wednesday, a day after he was indicted on federal charges of conspiring to rig the price of oil and gas leases. Numerous articles have reviewed his life and legacy. Russell Gold, senior energy writer for the Wall Street Journal and an energy journalism fellow at UT Austin, wrote in the Wall Street Journal that “Aubrey McClendon will be remembered … for helping to usher in an era of abundant natural gas, a weakened OPEC and a grievously wounded American coal industry. We are all living in the energy world that he envisioned a decade ago. ” McClendon was 56 years old.
In some respects, McClendon follows the tradition of wildcatters like Roy Cullen, H.L. Hunt, and Clint Murchison – taking big risks, re-inventing the industry. In other respects, he was the 21st century energy entrepreneur. He was single-handedly responsible for reviving the natural gas industry in the U.S. and, as reported by Gold, “grievously wounding” the U.S. coal industry. He did not invent hydraulic fracturing, but he used it to reinvigorate the oil and gas industry in the U.S.
McClendon was forced out of Chesapeake in 2012, after growing the company into the second largest natural gas producer in the U.S. He started his new company, American Energy Partners, and was recently working on a deal to exploit a shale play in Argentina.