Quicksilver to Spin off Certain Barnett Shale Assets

Quicksilver Production Partners LP (QPP), a wholly-owned subsidiary of Quicksilver, has filed for an initial public offering (IPO) to raise upto $250 million. In connection with the IPO, Quicksilver will contribute certain of its Barnett Shale assets and related derivatives to QPP. JP Morgan and Credit Suisse are acting as lead book-running managers for the proposed offering. Continue reading here..

Has Centrica Bagged a Discount Bargain in Statfjord??

In the deal announced today, Centrica has acquired Reserves estimated at 36 MMBOE for a consideration of $223 million, which yield an effective $/2P BOE of $6.19. This metric is approximately 20% lower than the one seen in the Centrica – Shell deal of Sep-2010 at $7.85 ($225 million for 28.67 MMBOE). Continue reading here..

Range Resources Q1 output up on Marcellus Shale drilling; Targeting Marcellus to be self-funding 2013 and capture full resource potential

Natural gas company, Range Resources Corp reports increase in its Q1 2011 production as the company focused on drilling the liquids-rich portion of the Marcellus Shale play in Pennsylvania and the Midcontinent regions. The company's production volumes up 17% to 545.5 mmcfepd, and they are on track to produce 400 mmcfe by the end of 2011. Range says by the end of 2012 they will be producing 600 mmcfe. Due to the outstanding performance of its existing wells combined with the initial performance of the newly connected wells, Range's Marcellus production has temporarily outgrown the existing infrastructure.

Range Expects the Marcellus Division to be a Value Driver for the Future
The Marcellus now appears to be the second or third largest natural gas play ever discovered in the world.  With the benefit of a large, liquids-rich window in southwestern Pennsylvania, the Marcellus offers the best economics of any large-scale, repeatable play in the US.  A significant portion of Range's acreage also offers the benefit of natural gas potential from the Upper Devonian and Utica shale formations that lie above and below the Marcellus.  In 2011, Range is directing 86% of its capital budget toward development drilling in the region.

Range has ~550,000 net acres in the SW part of the play. Over 800 wells have significantly de-risked 460,000 of Range’s acres. Assuming 80 acre spacing, and that 80% of this acreage will be drilled, this equates to 4,600 wells. The resource potential is for the Marcellus and does not include any potential from other shale zones. Utica and Upper Devonian shale wells have been completed and are currently waiting on pipeline connection.

Range is giving up 113 mcfe a day of natural gas production capacity with its 52,000 acre Barnett Shale sale. The $900 million Range gets for Barnett, coupled with cash flow and another $200-250 million in expected non-core asset sales this year, not only funds 2011 Marcellus development but also carries $400 million forward for 2012 development. Couple in 2011 and 2012’s development and production growth and Range expects 2013’s capex will be funded solely from its own cash flow.

Key Marcellus Deals in 2010 and 2011

Source: Derrick Petroleum E&P Transactions Database
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KKR acquires Carrizo’s Barnett assets for $104 million. Production is valued at $10,000/mcfe while peers value at $12,500/mcfe- How?

Carrizo Oil & Gas agreed to sell substantially all of its Barnett Shale Tier 1 properties to KKR Natural Resources, the partnership formed between an affiliate of Kohlberg Kravis Roberts & Co LP (KKR) and Premier Natural Resources, for $104 million. The properties that Carrizo are selling are largely in Parker County and represent only a small fraction of the company's Barnett Shale production, which equals about 100 million cubic feet of natural gas per day, said Richard Hunter, Carrizo's director of investor relations. The properties do not include Carrizo's highly productive, 22-well padsite at the University of Texas at Arlington, Hunter said.
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Carrizo President and CEO S. P. "Chip" Johnson, IV commented on the sale, "Our plan to focus our Barnett Shale development drilling on our Core properties in Tarrant County and our success in the initial development of our liquids-rich Eagle Ford Shale and Niobrara resource plays made our Tier 1 Barnett property a candidate for divestiture.

"With their significant proved developed producing reserve component in a reservoir we know well through our current operations in the region, the assets are a great fit for our KKR Natural Resources platform. We are pleased to add these assets to our oil and gas portfolio and remain excited about the opportunity to grow the KNR platform through the acquisition of additional oil and gas properties in North America," said Jonathan Smidt, a Member at KKR and a senior member of KKR's Energy and Infrastructure business.

KKR has been active acquiring conventional and unconventional assets in 2010. The following snapshot shows the deals that KKR clinched in 2010.

Source: Derrick Petroleum E&P Transactions Database

Acquisition metrics including probable reserves

The approximately 13,000 acres being sold include 75 gross (58.5 net) wells currently producing at an approximate gross rate of 15.7 MMcfe per day (8.3 MMcfed net). Estimated proved reserves associated with the divested properties amount to 122.4 Bcfe, 55% of which are proved undeveloped, as determined by Carrizo's third party engineers at year-end 2010.

Source: Carrizo - April IPAA 2011 OGIS Presentation

The probable reserves associated with this acquisition are approximately 100 Bcfe. The resource potential for the acquisition based on 58.5 net locations and 1.8 Bcf/well is estimated to be approximately $105 Bcf.

The probable reserves can be valued at $17 million based on $1/boe. The rest of the deal value could be assigned for proved reserves which gives the production metrics to be ~$62,000/flowing barrel (~$10,000/flowing mcfe) whereas peers value the reserves or production at $75,000/flowing barrel (~$12,500/flowing mcfe).