Thursday, May 5, 2011

Chevron acquires Marcellus acreage from Chief Oil and Tug Hill. Cost may be between $7,000-$11,000/acre!

Chevron has agreed to acquire oil and gas assets, primarily 228,000 net leasehold acres, in the Marcellus Shale from Chief Oil & Gas LLC and Tug Hill Inc. The acreage, which is principally located in southern Pennsylvania, will give Chevron an estimated five trillion cubic feet of additional natural gas resources in its Marcellus Shale operations.

Chief's spokeswoman Kristi Gittins said the sale involves all of Chief’s interests in Cambria, Somerset, Bedford and Blair counties. "After the sale of these properties, Chief and Tug Hill will have approximately 125,000 acres of Marcellus leasehold, focused in the Bradford, Susquehanna, Tioga, Sullivan and Wyoming counties of northeastern Pennsylvania" said Trevor Rees-Jones, president and CEO of Chief.
Below is the map showing Chevron’s position in Marcellus
The following table shows the acreage metrics of Marcellus deals
How much did Chevron pay for the Marcellus acreage??
Though the financial terms of the transaction were not disclosed, the assets could be valued as follows…
  • Method-1: The average metrics for Marcellus Shale acreage run between $7,000-$11,000/acre which leaves the transaction value between $1.6-$2.5 billion.
  • Method-2: It is disclosed that this transaction includes 5 TCF (~833 mmboe) of resources. The past transactions in the Marcellus Shale have valued the resources in the range of $2-$3/BOE. Applying the same metris for the resources that Chevron have acquired, the transaction is valued between $1.6-$2.5 billion.
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