Kalnin Deal Continues Conquest Of Northeast Marcellus

Kalnin Ventures LLC’s Marcellus Shale ascent continues.

The company churned out its sixth deal in 30 months with the purchase of Warren Resources Inc.’s entire northeast Marcellus position, Kalnin said Dec. 12.

The $105 million acquisition includes potential payments of $3.75 million during the next two years, depending on natural gas prices. The price represents roughly one-third of what seller Warren Resources paid for about 5,300 acres in 2014.

After closing the deal, Kalnin’s ownership interests will extend to 330 gross wells spread across 60,000 net acres, the company said. Additionally, Kalnin, already one of the top 20 natural gas producers in the shale, said its production will increase to a projected 200 million cubic feet per day (cf/d)—up from its previous estimates of 160 MMcf/d.

In 2014, Warren Resources’ purchased 5,289 net acres in the Marcellus for $352.5 million. As of December 2016, the company only listed that acreage in regulatory filings and said that 2,697 net acres were undeveloped. The company had pad and pipeline infrastructure in place, according to a 2016 presentation to bondholders. Warren emerged from bankruptcy protection in October 2016.

Warren Resource’s acreage in Wyoming County, Pa., includes “solid” operating cash flow from 35 producing wells, Kalnin said. The deal also adds 23 proved undeveloped well locations in the lower Marcellus and proven reserves of 292 Bcf to what Kalnin calls the super core of the northeast Marcellus.

The deal fits the company’s previous purchases in Wyoming County, allowing it to “integrate two separately operated fields into a single larger field that is more efficient and at scale,” said Christopher Kalnin, the company’s managing director and co-founder.

Kalnin, which is backed by Thailand-based coal mining and power generation company Banpu Pcl, continues to consolidate and expand its interests in the region. With its latest deal, the company will have invested $522 million in Marcellus acquisitions.

“We continue to consolidate and expand our working interests in this region, as we believe in the long-term outlook for gas, especially in the conjunction with growth in renewables,” said Kalnin.

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The deal is expected to close by the end of December, the company said.

Willkie Farr & Gallagher LLP acted as Kalnin’s legal adviser. UBS Investment Bank acted as financial adviser to Warren Resources and Harris, Finley & Bogle PC was its legal adviser.

Darren Barbee can be reached at dbarbee@hartenergy.com.