American Energy-Utica LLC
Secured joint-venture agreement to develop portion of Red Hill's Utica shale in Ohio.
Aubrey McClendon has resurfaced, and he appears bent on taking on the Utica.
McClendon, the former Chesapeake Energy CEO, has raised $ 1.7 billion in capital and now, with a new joint-venture agreement, has even more firepower.
Red Hill Development, part of the family owned Kimble Cos., has entered a JV with McClendon’s American Energy-Utica LLC (AEU) for development of a portion of Red Hill’s Utica shale acreage located in Eastern Guernsey and Western Harrison County. Those areas are in the core of the wet gas window.
Reports suggest the development could involve 50,000 acres.
The joint venture plans to immediately apply for Utica well permits and commencing construction on well sites as early as October, with the first well to be spud before the end of 2013. Plans for additional drilling activity are being developed for 2014 through 2016.
Red Hill said it will maintain a “significant ownership position” in its Utica leaseholds included in the JV, and will be involved in future investment and drilling operations alongside AEU.
“The joint venture will enhance our ability to fully and expeditiously develop our acreage in Harrison and Guernsey counties while we continue to explore opportunities for development of our additional holdings in the region,” said Keith B. Kimble, manager of RHDK Oil & Gas LLC, dba Red Hill Development.
“We’ve spent a great deal of time and energy studying the Utica shale and the best available technologies to use in order to effectively develop the Utica,” Kimble said. “We have a lot of history drilling through the Utica and know it can be challenging and will require a tremendous amount of capital.”
Kimble said the family looked for the best opportunity to develop leases quickly, safely and productively. It spent the past few years working with various banks and private equity groups to finance drilling operations and negotiating with midstream companies for transportation and processing options.
After all due diligence, the best fit for rapid, safe and productive development was a joint venture, Kimble said.
“Aubrey’s ability to raise money for development, and his experience in horizontal drilling in general and the Utica Shale in particular, were a perfect fit for Red Hill Development,” Kimble said.
McClendon may have some interest in the Niobrara, as well. But his eye is clearly trained on the Utica.
“Thus far it seems that McClendon has been solely focused on increasing its acreage position in the Utica shale with his land men marching to the orders of don't get outbid on leases,” said Hsulin Peng, senior analyst, E&P, for Baird Energy.
While still with Chesapeake, McClendon completed a $2.32 billion joint venture with Total SA that gave the French company a 25% interest in 619,000 net acres in the liquids-rich area of the Utica Shale.
“McClendon put the Utica on the map back at Chesapeake Energy and his continued bullishness on the play is a positive for other Utica players. Interestingly though, this time around McClendon's leasing appears to be focused further south in the wet gas window than the first time, confirming the emerging core where industry drilling is currently focused.”
In August, McClendon’s American Energy was said to be behind the $284.3 million purchase of EV Energy Partners LP (Nasdaq: EVEP) and EnerVest’s Utica acreage.
“One interesting data point that surfaced was that American Energy Partners is getting aggressive in the basin,” David Tameron, Wells Fargo senior analyst, said at the time.
American Energy-Utica is an offshoot of McClendon’s American Energy Partners LP, which is privately held.