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Companies go on $3.2B spending spree in Barnett Shale
Ray Tyson For Petroleum News
Three of the leading producers in the sizzling Barnett Shale gas play in East Texas — Devon Energy, Chesapeake Energy and XTO Energy — doled out a collective $3.2 billion for additional Barnett Shale properties during the past month alone.
Oklahoma-based Devon, by far the largest and most active player in the region, agreed to purchase $2.2 billion worth of properties held by privately owned Chief Holdings, raising Devon’s leasehold position in the Barnett Shale to 720,000 acres from 551,000 acres, a roughly 30 percent increase.
“This was a unique opportunity to add to Devon’s position in the hottest natural gas play in North America,” said Larry Nichols, Devon’s chief executive officer. The deal is expected to close on June 29.
The Chief properties include proved reserves of 617 billion cubic feet of natural gas equivalent and leasehold totaling 169,000 net acres. Devon said it plans to drill about 800 wells over the next five years and ultimately recover in excess of 2 trillion cubic feet of natural gas equivalent from the properties.
Devon entered shale play in 2002 Oklahoma-based Devon entered the unconventional shale play in 2002 with the $3.5 billion acquisition of Mitchell Energy.
Upon closing of the Chief acquisition, Devon’s daily production from the Barnett Shale will increase by about 55 million cfe to about 655 million cfe. An additional 31 Chief production wells are awaiting completion and pipeline connection and are expected to add an additional 30 million cfe per day, Devon said.
Devon said it expects to increase daily production from the Chief properties to more than 250 million cfe in 2009.
With the Chief acquisition, Devon increased its long-term production forecast from 9.5 percent to 11 percent for the period 2006 through 2009, reflecting annual production approaching 300 million barrels of oil equivalent in 2009.
Devon’s successful bid for Chief was made jointly with Crosstex Energy Services, a leading independent pipeline company with a strong presence in the Barnett Shale.
Chesapeake also a purchaser Chesapeake, also based in Oklahoma, entered into agreements to purchase $932 million worth of properties in the Barnett Shale, with $845 million of the total going to Four Sevens Oil and its partner, Sinclair Oil, Chesapeake said June 5. The deal includes 39,000 net acres, 30 million cfe per day of natural gas production and mid-stream assets.
Of the 39,000 acres, 26,000 acres are in Johnson and Tarrant counties, where Chesapeake said it has identified 500 potential drill sites. The company said the remaining 13,000 acres are in East Texas counties outside the company’s core focus area. Chesapeake said it would cost about $1.2 billion to fully develop the estimated 870 billion cubic feet of proved and unproved gas-equivalent reserves on the Four Seasons-Sinclair properties.
Separately, Chesapeake said it acquired or agreed to acquire an additional 28,000 net acres of leasehold, primarily in Johnson and Tarrant counties, from various additional sellers for $87 million. On this acreage, Chesapeake said it expects to drill 400 wells to develop 650 bcfe of unproved reserves at a cost of about $1.1 billion.
Through these transactions, Chesapeake said it expects to acquire an estimated 1.5 trillion cubic feet of natural gas equivalent of proved and unproved reserves, comprised of 0.16 tcfe of proved reserves and 1.36 tcfe of unproved reserves.
Chesapeake anticipates increasing the 30 million cfe of daily gas production from the Four Sevens-Sinclair assets to at least 45-50 million cfe by year-end 2006 and 80-100 million cfe by year-end 2007.
XTO purchasing Peak Energy Resources Texas-based XTO said June 1 that it agreed to purchase privately held Peak Energy Resources, a Barnett Shale producer, for 2.555 million shares of XTO common stock, valued at about $105 million.
The acquisition would increase XTO reserves and leasehold acreage in the Barnett Shale region, primarily in Hood, Parker and eastern Erath counties.
XTO estimated Peak Energy’s proved reserves to be 64 billion cubic feet of natural gas, 14 percent of which are proved developed. Additional potential is more than 200 bcf of natural gas, the company said.
Proved reserve estimates were based on the ownership of about 33,000 net acres with new well locations spaced at 100 acres, XTO said, adding that the company expects reserves of 1.0-1.5 bcf for each new well at a cost of about $1.6 million.
Production from the properties is expected to reach 10 million cf per day by the end of 2006 and more than 25 million cf per day in 2007, XTO said.
This transaction is expected to close on June 30.
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