Company Briefs

Talisman Energy to sell partial Montney for $1.43B

Talisman Energy Inc. (Toronto: TLM; NYSE: TLM) agreed to sell part of its Montney acreage in northeastern British Columbia to Progress Energy Canada Ltd. for C$1.5 billion (US$1.43 billion).

The sale includes 75%, or about 127,000 net acres, of Talisman's Montney position in the Farrell Creek and Cypress areas of British Columbia.

Farrell Creek production as of Oct. 1 was 65 million cu. ft. equivalent per day (MMcfe/d), which is expected to increase in the fourth quarter of 2013 as Talisman concludes its completion program and associated facilities.

The transaction also sells C$800 million of remaining third-party capital carry as estimated at 2013 year-end.

Analysts at Tudor, Pickering, Holt & Co. liked the deal, though the price was below its $2-billion valuation.

While the deal is a minor hit to net asset value, any loss is outweighed by a positive move to clean up the company's portfolio.

Talisman “should easily be able to replace production through acceleration of Marcellus and Duvernay drilling,” Tudor, Pickering said. “TLM will retain 48,000 net acres in Groundbirch, which may be sold at a later date.”

Talisman has held its Montney position for five years. It is retaining assets in Groundbirch and Saturn, including about 48,000 net acres of prospective Montney land.

Jefferies LLC and Scotiabank were joint advisors to Talisman.

Encana reorganizes, slashes workforce, dividend

Encana Corp. (NYSE: ECA), Canada's largest natural gas producer, will cut its workforce by 20%, slash its dividend and sell shares in a new royalty company as it seeks to boost cash flow in the coming years.

Encana is focusing spending for 2014 on five oil and liquids areas—the Duvernay, Montney, DJ Basin, San Juan Basin and Tuscaloosa Marine shale, according to the Calgary-based company. At least 800 jobs will be lost, based on the size of the workforce in 2012, reported on the company's website.

Doug Suttles, who became chief executive officer in June, said at a September investor conference the company needs to “clean up its portfolio” and will review its dividend as part of a strategic review. Encana, which has maintained a 20-cent quarterly payout since 2009, announced a 7-cent dividend.

“Through its disciplined and focused growth strategy the company believes it can average a more than 10% compound annual growth rate in cash flow per share through 2017,” Encana said in a statement.

Encana will put 5 million acres of land with gas and oil royalty production into a separate company, with an initial public offering in mid-2014. The workforce will be cut by about 20% and offices will be combined in Calgary and Denver.

Capital spending next year will be $2.5 billion, the company said.

Encana last month reported a return to profit, with third-quarter results beating analysts' estimates after oil and petroleum liquids output increased. The company has been directing more spending to oil production after North American gas prices hit a 10-year low last year.

Linn, Berry merger advances, deal upsized to $4.9B

Linn Energy LLC (Nasdaq: LINE), LinnCo LLC (Nasdaq: LNCO), Houston, and Berry Petroleum Co. (NYSE: BRY), Denver, have unanimously approved an amended merger agreement.

The amendment provides for an increase in the exchange ratio that each outstanding share of Berry common stock would receive in the merger and an extension of the end date to Jan. 31, 2014.

Under the terms, LinnCo has agreed to increase the number of common shares it is issuing to 1.68 common shares, from 1.25 common shares, for each common share of Berry outstanding prior to the merger, for total consideration of $4.9 billion, including the assumption of debt. The deal value increased by $600,000 from the initial offer.

The transaction, structured as a stock-for-stock merger of Berry with LinnCo, followed by the acquisition of the Berry assets by Linn Energy, is expected to be tax-free to Berry shareholders.

The proposed merger will create one of the largest independents in North America with pro forma production of more than 1 billion cu. ft. equivalent per day and proved reserves of 6.6 trillion cu. ft. equivalent, with 54% liquids.

In a joint statement, Mark E. Ellis, chairman, president and chief executive of Linn Energy, and Robert F. Heinemann, president and chief executive of Berry Petroleum Co., said, “The boards and management teams of Linn and Berry remain committed to completing this merger. We continue to believe that, upon completion, this transaction will create tremendous value for Linn Energy, LinnCo and Berry investors.”

NGL Energy inks $890MM deal in Gavilon takeover

Continuing a string of recent midstream deals, NGL Energy Partners LP (NYSE:NGL) will take over Omaha-based Gavilon LLC for $890 million.

Gavilon is a diversified midstream energy business owned by funds managed by Ospraie Management, General Atlantic and Soros Fund Management.

NGL would purchase Gavilon's energy business on a cash-free, debt-free basis for $890 million cash, including some $200 million of working capital.

Gavilon operates integrated crude oil storage, terminal and pipeline assets in Oklahoma, Texas and Louisiana, along with a complementary crude oil and refined products supply, marketing and logistics business.

Gavilon's crude oil assets include a 50% interest in Glass Mountain Pipeline, with 4.14 million owned and 3.85 million leased barrels of storage in Cushing, Okla.

The company also owns a marine terminal and nine truck terminals, and leases a network of more than 200 trucks, 350 railcars and eight barges to transport crude oil for customers. It markets and supplies refined products and natural gas liquids through a network of more than 300 distribution terminals across 39 states.

UBS Investment Bank is NGL's exclusive financial advisor and Locke Lord LLP is its legal counsel. Barclays is Gavilon's and the sellers' exclusive financial advisor. Jones Day and Mc-Grath North provided legal representation for Gavilon.

Bellatrix to enter joint venture, buy Angle Energy

Bellatrix Exploration Ltd. (NYSE: BXE) announced it has entered into a $240-million joint venture partnership with TCA Energy Ltd. The same day, Calgary-based Bellatrix agreed to acquire Angle Energy Inc. (Toronto: NGL) for $576 million.

Bellatrix said the combination of its asset base with Angle's assets will result in one of the largest intermediate producers in the west-central Alberta fairway. The acquisition increases Bellatrix's drillable inventory to more than 2,000 locations and doubles its undeveloped land base to more than 400,000 net acres.

The joint venture with TCA involves drilling and developing lands in the Ferrier Cardium area of west-central Alberta.

TCA is a Canadian company backed by Troika Resources Private Equity Fund in Seoul, Korea, and managed by KDB Bank, SK Energy and Samchully AMC.

Crestwood Midstream to acquire Arrow Midstream

Houston-based Crestwood Midstream Partners LP (NYSE: CMLP) plans to buy Arrow Midstream Holdings LLC for $750 million. The acquisition follows Crestwood's $8-billion merger with Inergy Midstream (Nasdaq: CMLP), as Crestwood focuses on liquids through expansion of operations in the Bakken.

Arrow owns and operates crude oil, natural gas and water gathering systems on the Fort Berthold Indian Reservation in the Bakken core in McKenzie and Dunn counties, North Dakota.

Robert G. Phillips, chairman, president and chief executive of Crestwood's general partner, said the early efforts by Crestwood and Inergy to integrate commercial, operations and back-office teams in advance of their merger make the additional Arrow assets and operations effectively a bolt-on acquisition.

The Arrow system is currently undergoing an extensive expansion of its gas gathering capacity to capture current flared natural gas volumes. These enhancement projects, including line looping and system compression, are expected to be substantially complete in the fourth quarter of 2013.

SM Energy to divest Anadarko assets for $343MM

SM Energy Co. (NYSE: SM) announced the divestment of its properties in the Anadarko Basin, including its Granite Wash interests, to various affiliates of EnerVest Ltd. for some $343 million.

SM is expected to shift capital from the sale to the Eagle Ford, Bakken and Permian Basin.

Production from the assets for third-quarter 2013 was approximately 8,500 bbl. of oil equivalent per day (BOE/d), 75% natural gas. The production constituted about 6% of SM's total production in the third quarter. The Anadarko Basin assets include about 58,000 net mineral acres.

The sales price was in line with expectations of $300- to $350 million, says Gabriele Sorbara, an analyst for Topeka Capital Markets. The assets' third-quarter production puts the transaction's value at $40,353 per flowing BOE of production and $5,914 per acre.

Wells Fargo Securities LLC was financial advisor to SM Energy.

Cabot deals Marmaton properties for $188MM

Cabot Oil & Gas Corp. (NYSE: COG) announced the sale of proved and unproved assets in the Midcontinent and West Texas for $188 million.

The assets include approximately 66,000 net acres, current production of approximately 2,000 bbl. of oil per day and proved reserves of approximately 8.4 million BOE, as of Oct. 1, 2013.

In the deal, Cabot sold its Marmaton assets in Oklahoma and Texas for approximately $160.1 million to Chaparral Energy, a privately held company. The West Texas legacy conventional properties went to an undisclosed buyer for approximately $28 million. The assets include current production of approximately 260 BOE/d and proved reserves of approximately 1.5 million BOE, as of year-end 2012.

The transactions averaged an implied valuation of $19 per proved BOE, $83,230 per flowing BOE per day of production and $2,850 per acre, says Gabriele Sorbara, an analyst with Topeka Capital Markets.

“These are great metrics for noncore assets, especially when considering the potential value creation to COG from redeploying the proceeds to the Marcellus shale, with internal rates of return north of 100%, and the Eagle Ford shale, with IRRs north of 50%,” he says.

Houston-based Cabot can likely make up the lost production with an acceleration of its Marcellus shale and/or Eagle Ford shale activities.

Evercore was financial advisor to Cabot on the transactions.

Noble, Anadarko swap Wattenberg assets

Noble Energy Inc. (NYSE: NBL) and Anadarko Petroleum Corp. (NYSE: APC) have agreed to swap 50,000 net acres each in the Wattenberg area of northern Colorado.

As part of the deal, Noble was reimbursed $202 million for capital spent to drill and complete wells on the acreage conveyed to Anadarko. That was partially offset by other adjustments, which determined the $105 million cash Noble received at closing.

The trade consolidates acreage, centralizes operations and should allow for quicker development of longer laterals in the area for both parties, Tudor, Pickering, Holt & Co. said.

For Anadarko, the acreage exchange enhances its core development area while retaining the benefits of its Land Grant mineral ownership on approximately 21,000 acres of the lands to be conveyed to Noble. The trade also will increase Anadarko's daily production by approximately 8,000 BOE per day at current production levels.

Noble's net production will fall a corresponding 8,000 BOE per day, almost entirely related to the recently drilled wells.

Noble said the short-term reduction in production is anticipated to be quickly offset with operational efficiencies and cost savings. For 2014, the company's Denver-Julesburg Basin volumes are still expected to grow at a rate of at least 20%.

The Wattenberg trade unlocks significant additional value for both companies through consolidation, said Chuck Meloy, Anadarko executive vice president, US onshore exploration and production. “The trade is expected to achieve greater operating efficiencies, reduce costs and local impacts, and further improve safety performance.

“This exchange also demonstrates Anadarko's active portfolio management and commitment to accelerating cash generation, as we anticipate increasing activity on our core Wattenberg acreage, where we are generating rates of return that exceed 100%.”

Noble Energy is based in Houston. Anadarko Petroleum is based in The Woodlands, Texas.

Surge buys C$282MM in oil assets, Canadian Bakken

Calgary-based Surge Energy Inc. (Toronto: SGY) completed two light-oil acquisitions in Saskatchewan and Manitoba for C$282 million.

The deal puts Surge's holdings at more than 1 billion barrels of light- and medium-gravity original oil in place with a recovery factor of less than 3%, the company said.

In one deal, Surge bought a Calgary-based private oil and gas company for C$147 million. The company has highnetback, operated producing light-oil assets focused in the Steelman and Dodsland areas of Saskatchewan.

The other, a C$135 million acquisition, gives Surge access to Manitoba assets in a light-oil play in the Bakken/ Three Forks formation.

The private acquisition provides a strategic entry point for Surge into the Midale Marly light-oil play in southeastern Saskatchewan and the Viking light-oil play in southwestern Saskatchewan.

Separately, Surge said it planned to buy operated, oil-producing assets near its core area near Wainwright, in central Alberta, for C$76.8 million. Included are more than 980 bbl. per day of production from the Sparky formation.

In conjunction with the acquisition, Surge has entered into a C$55-million bought-deal financing with a syndicate of underwriters led by Macquarie Capital Markets Canada Ltd. Members of the Surge team will be participating in the equity financing.

Kelt buys Alberta assets for C$192MM

Kelt Exploration Ltd. (Toronto: KEL) agreed to acquire assets in the Pouce Coupe/Spirit River area in west-central Alberta for C$192 million. The seller was not disclosed. The assets are close to the company's core producing areas at Grande Cache and Karr. The acquisition will be financed with existing cash on hand and proceeds from an equity financing. The company has received a commitment letter from its bank, National Bank of Canada, to increase its bank credit line to C$100 million upon closing of the Pouce Coupe/Spirit River acquisition.

Enerplus ups Marcellus, parts with Montney leases

Enerplus Corp. (Toronto, NYSE: ERF) has acquired working interests in 17,000 net nonoperated acres within its core Marcellus properties.

The company will pay $153 million before adjustments for the acreage, which has current production of about 42 MMcf per day.

The company is also selling its Montney interests in northeastern British Columbia for $130 million.

The acquisition in northeast Pennsylvania increases Enerplus' working interest in existing nonoperated leases. About 60% of the total leases being acquired are held by production. Upon closing of the acquisition, Enerplus' core Marcellus acreage will total 60,000 net acres.

Calgary-based Enerplus' divestment in the Montney involves 33,300 net contiguous acres with 100% working interest. The sale price works out to about $3,900 per acre. Natural gas produced in the area is predominantly dry.

More M&A news

• Whiting Petroleum Corp. (NYSE: WLL) closed its sale to a private company of acreage in the company's Big Tex prospect for $150.1 million. The sale included 32,182 net acres and 200 net BOE/d in the Delaware Basin. Of the total net acres, 30,821 are in Pecos County, Texas, and 1,361 net acres are in Reeves County, Texas.
• Carrizo Oil & Gas Inc. (Nasdaq: CRZO), Houston, closed its sale of mineral leases in the northern portion of the Utica shale to an undisclosed buyer for $43 million in cash. The leases are in Mercer and Crawford counties, Pennsylvania, and Trumbull County, Ohio. Included in the sale are an existing drilling pad and approved well drilling permits associated with the leases.
  Immediately prior to the sale, Carrizo exercised a mineral lease option to increase its ownership from 10% to 50% undivided interest in the same properties from a subsidiary of its financial partner, Avista Capital Holdings LP. Carrizo will continue to own a 10% undivided interest, along with a similar option to increase its ownership to 50%, in nearly 26,000 additional gross acres in the southern portion of the play, primarily Guernsey County, Ohio.
• The Australian subsidiary of Chevron Corp. (NYSE: CVX) has purchased exploration interests in two offshore blocks located in the Bight Basin, a deepwater frontier basin off the South Australia coast, the company announced. Blocks S12-2 and S12-3, which span more than 8 million acres, are about 275 miles west of Port Lincoln. Chevron Australia is the operator with a 100% interest.
  Chevron is based in San Ramon, Calif.
• Quicksilver Resources Inc. (NYSE: KWK) and Eni are partnering again, this time to evaluate, explore and develop about 52,500 gross acres in the Delaware Basin.
  The acreage is held by Quicksilver in the Leon Valley area in Pecos County, Texas. Rome-based Eni will pay up to $52 million, representing 100% of drilling, completion and seismic costs to earn a 50% interest in Quicksilver's Pecos acreage.
  Eni has agreed to invest in the drilling and completion of up to three wells by June 2014. Funding by Eni gives the company 50% of Quicksilver's interest in a 7,500 gross-acre tract also in the Leon Valley area. Eni will then have the option to fund the drilling and completion of two additional wells and commit to a 3-D seismic survey in order to fully earn a 50% interest in Quicksilver's Pecos County acreage.
  After Eni's $52-million investment, the parties will share equally in future revenue, operating costs and capital expenditures.
  The companies will form a joint evaluation team for exploration and development, with Fort Worth, Texas-based Quicksilver as designated operator.
• Houston-based W&T Offshore Inc. (NYSE: WTI) signed off on a $100-million deal to purchase the Gulf of Mexico exploration and production assets of Callon Petroleum Operating Co. (NYSE: CPE), based in Natchez, Miss.
  The transaction includes a 15% working interest in Medusa Field, a 10% membership interest in Medusa Spar LLC (which owns a 75% interest in Medusa Field's production facilities), and various interests in 12 nonoperated Gulf of Mexico fields.
  The package includes total net proved reserves of 2.4 million BOE, all of which are classified as proved developed reserves; probable reserves of 2.3 million BOE; and possible reserves of 2 million BOE.
  The transaction was funded from W&T's Offshore's available cash on hand and revolving credit facility.
• Energy Ventures, an independent venture-capital firm, has invested in SageRider Inc., Stafford, Texas. The funding will support the development and commercialization of SageRider's suite of reservoir and completion optimization solutions.
  Founded in 2008, SageRider operates in every major US shale basin, including the Eagle Ford, Bakken, Cana, Permian, and Marcellus plays. The company has offices in Houston, Dallas, Oklahoma City and Denver.
• Houston-based Plains All American Pipeline LP (NYSE: PAA) is moving forward with merger plans with PAA Natural Gas Storage LP (NYSE: PNG).
  The transaction will translate into approximately 14.7 million additional common units being issued by PAA, resulting in a merger in which PNG will become a wholly owned subsidiary of PAA, through a unit-for-unit exchange.
  In connection with the merger closing, the owners of PAA's general partner have agreed to reduce their incentive distribution rights under PAA's agreement of limited partnership by $12 million in 2014 and 2015, $10 million in 2016 and $5 million per year thereafter.
  Under the terms of the merger agreement, PNG's public unitholders will receive 0.445 common units of PAA per PNG common unit surrendered, plus cash in lieu of any fractional common units of PAA otherwise issuable in the merger.

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