2011-05-31-2011-05-04
To acquire 228,000 net leasehold acres in Marcellus shale primarily in SW PA, gaining 4 Tcfe 3P.
Increasing its stakes in the one of the U.S.' most prolific shale-gas basins, global integrated energy company Chevron Corp., San Ramon, Calif., (NYSE: CVX) plans to acquire oil and gas assets, primarily 228,000 net leasehold acres in the Marcellus shale from Dallas-based, privately held Chief Oil & Gas LLC and private-investment firm Tug Hill Inc. The deal value was not disclosed.
The acreage, principally in southwestern Pennsylvania, will give Chevron an estimated 5 trillion cubic feet of additional natural gas resource in its Marcellus shale operations.
Earlier this year, Chevron broke into the Marcellus by staking a 486,000-acre claim in the shale play via the acquisition of Pittsburgh-based Atlas Energy Inc. (Nasdaq: ATLS) for $4.3 billion in cash and debt. Chevron acquire approximately 850 billion cubic feet of proved gas reserves and daily production of 80 million cubic feet of gas. Estimated resource potential was pegged at some 9 trillion cubic feet equivalent.
On the latest transaction, George Kirkland, Chevron vice chairman, says, "This opportunity is aligned with our strategy to acquire early-in-life assets with long-term organic growth potential." Considering its recent bids, Chevron sees such potential in the shales, both domestic and international.
During the last year alone, Kirkland notes, Chevron has acquired nearly 5 million net acres of shale-gas assets in the U.S., Canada, Poland and Romania.
Chief president and CEO Trevor Rees-Jones also referenced Chevron's recent push into the shales. "We are pleased to enter into this agreement with Chevron and feel it is an excellent addition to their recently acquired Atlas Marcellus position," he says.
According to Jones, Chief and Tug Hill will retain about 125,000 acres of Marcellus leasehold, focused in the Bradford, Susquehanna, Tioga, Sullivan and Wyoming counties of northeastern Pennsylvania. As well, Chief will maintain its regional office in Wexford, Pa., and its office in Lycoming County.
Meanwhile, Chief's midstream subsidiary, Chief Gathering, "will not be affected by the sale and will maintain its field office in Lycoming County and continue to develop its planned pipeline infrastructure in Pennsylvania," says Rees-Jones.
Since 2007, Chief Oil & Gas has drilled 131 wells in the Marcellus shale. Chief plans to exit 2011 as operator of three rigs drilling in the Marcellus, excluding the nonoperated interests the company owns in leases and units also being drilled.
Mark Deverka at Bank of America Merrill Lynch advised Chief and Tug Hill.
The deal is expected to close before the end of second-quarter 2011.