2011-01-14-2010-12-22
To buy 50,000 net PA Marcellus acres in Lycoming, Sullivan and Columbia cos., gaining 40 MMcf/d.
Exco Holding PA, a subsidiary of Exco Resources Inc., Dallas, (NYSE: XCO) plans to acquire properties prospective for the Marcellus shale from privately held, Dallas-based Chief Oil & Gas LLC and Radler 2000 LP for approximately $459.4 million.
The assets include 50,000 net acres prospective for the Marcellus shale primarily in Lycoming, Sullivan and Columbia counties in northeastern Pennsylvania, with 15 producing wells and 11 wells currently awaiting completion. Production is approximately 40 million gross cubic feet of gas per day (16 million net).
The assets are within the area of mutual interest established by an existing Appalachian joint venture with BG Group Plc, London, (London: BG-L.l). BG Group has the right to purchase 50% of this acquisition. Should BG Group participate, the development of these assets would be governed by Exco's Appalachian joint venture.
"After the sale of these properties, Chief and Radler will continue to own more than 287,000 net acres of Marcellus leasehold in a gross position covering approximately 500,000 acres, and we are enthusiastic about continuing to drill and develop our acreage in this world-class shale play," says Chief president and chief executive Trevor Rees-Jones. "We believe this position holds substantial gas reserves, which can only grow in desirability as our nation turns to readily-accessible, abundant and clean-burning natural gas as the primary fuel of the future to grow our economy and support our nation's security, employment and standard of living."
Rees-Jones adds that neither its employees, nor its offices in Wexford and Williamsport, Pennsylvania will be affected by the sale. Moreover, Chief's midstream subsidiary, Chief Gathering, will also not be affected and will continue to develop its planned pipeline infrastructure in Pennsylvania.
The purchase will be funded with borrowings from Exco's credit agreement.
The companies plan to close the transaction into an escrow account pending receipt of a waiver from a third party, which is expected to be obtained by Jan. 14, 2011. The effective date is July 1, 2010.
Mark Deverka / Bank of America Merrill Lynch is represented Chief and Radler.
In August, The Pittsburgh Business Times began speculating that Chief would soon put Marcellus acreage on the market. The privately held company held 600,000 acres in the Marcellus at the time. In 2006, Chief sold its Barnett shale acreage to Devon Energy for $2.2 billion.
Chief has drilled 95 wells in the Marcellus shale in Pennsylvania and West Virginia and will remain one of the largest leaseholders and most active operators in the Marcellus shale. Chief plans to exit 2010 as operator of nine rigs drilling in the Marcellus, not counting non-operated interests owned in leases and units being drilled by multiple rigs operated by others.