Independent producer Halcon Resources likely will be required to divest one of the jewels in its nearly $1 billion takeover of GeoResources — 24,000 net acres of liquids-rich acreage in the prolific Eagle Ford shale play in Fayette County, Texas.
That’s because Halcon Chief Executive Officer Floyd Wilson, formerly CEO of Petrohawk Energy Corp., signed a “non-compete” agreement with Australia’s BHP Billiton when BHP acquired Petrohawk last year in a $15 billion deal that included Eagle Ford acreage.
“We plan to divest this property, unless I can work something else out with BHP,” Wilson said in an April 25 conference call with analysts. “I suspect that we will end up divesting the property as per our agreement. They did a great job of dealing with us in a very business-like way, and we intend to respond in the same way.”
Like many other U.S. shale players, BHP is shifting its focus from natural gas to oil. Since the Petrohawk acquisition, BHP has dramatically increased its drilling activities in the Eagle Ford. Moreover, successful drilling by GeoResources has “de-risked” its acreage in the Eagle Ford, Wilson said.
BHP told analysts in February that the company was planning to moderate the number of drilling rigs in dry gas areas and increase the liquids component of production to 20 percent on a boe basis by 2015.
The company said it expects activity in the liquids-prone Eagle Ford and Permian basins to represent the significant majority of its U.S. onshore activity by the end of 2012.
“We continue to adjust our onshore U.S. development plans in response to lower (gas) prices,” the company said in its latest quarterly production report.
Eagle Ford and the Bakken, the U.S.’s premier unconventional oil plays, make up the lion’s share of GeoResources’ capital budget. The deal does give Halcon a significant position in Bakken, on both the North Dakota and Montana side of the border.
Wilson said whatever deal it works out with BHP on GeoResources’ Eagle Ford acreage will have to wait until after Halcon’s merger with GeoResources closes, expected sometime in this year’s third quarter. Until then, he added, it’s business as usual, with GeoResources and Halcon pursuing their own separate projects,
“It will be an extremely easy property to sell for top dollars,” Wilson said of Eagle Ford. “It is a very valuable asset, and we intend to make the most of the value of that asset in whatever way we can.”
Analysts have said GeoResources’ Eagle Ford acreage could fetch around $180 million.
—Ray Tyson
