Increases Net Utica Position to more than 230,000 Acres
Gulfport Energy (ticker: GPOR) made its second sizable acquisition in three months on June 9, 2015, landing 45,163 gross acres (33,426 net) in the Utica Shale from American Energy – Utica, LLC (AEU), a subsidiary of privately held American Energy Partners. The current purchase price is $387.2 million, but a deal for an additional 4,950 gross (net acres) is in place “if AEU completes the acquisition of such acreage within 30 days of the closing of the Monroe acquisition,” says the news release. If the shoe-in asset purchase is completed, GPOR’s total purchase price will be approximately $406.6 million.
Details on its latest deal are listed below (italicized section subject to .
|Price (MM)||Counties||Acres (Net)||Production||Details|
|$319.0||Monroe||27,228||14.6 Mmcfe/d||Includes 18 gross (11.3 net) uncompleted wells, a fully constructed pad and 287 MMcfe/d of takeaway capacity|
|$19.4||Monroe||1,900||Determined on AEU closing extra interest|
The Belmont and Jefferson properties are bolt-on acquisitions to GPOR’s purchase on April 16, 2015, when the E&P secured 24,000 net nonproducing acres for $300 million. Assuming all transactions close successfully, Gulfport will have acquired nearly 40,000 net acres (75% undeveloped) for approximately $706.6 million. An updated table from a previous article covering Gulfport’s acquisition is listed below.
Comparative Deals in Eastern Ohio
|Date||Buyer||Price (millions)||Acres (net)||Price/Acre||Spot Price at Time of Sale*||3-Year Futures Price*|
|6/9/14||American Energy Partners||$475||27,000||$17,592||$4.65||$4.29|
*Henry Hub price according to data compiled from Bloomberg
Funding the Deal
The similarities of these deals go beyond the undeveloped acreage and privately held sellers. GPOR is issuing 10 million shares of common stock with an option for an additional 1.5 million shares. Proceeds will be used to fund the purchase of AEU’s assets in addition to general corporate purposes and funding its 2015 capital development plans, which were projected at $561 to $611 million in its Q1’15 release. The company listed $74.7 million in cash on hand for the latest quarter, with $70.5 million outstanding on its $575 million borrowing base.
Following its April acquisition, the company raised $786.4 million with a combination of debt and equity raises. The proceeds paid off the outstanding balance on its credit facility and were intended to fund a portion of its 2015 expenditures.
Pro forma for the acquisitions, Gulfport will hold approximately 262,000 gross leased acres (243,000 net) in the Utica Shale. GPOR believes it has added 350 net drilling locations with its two recent purchases, assuming 160-acre spacing. The latest deal is expected to provide 200 locations. The company was already planning on adding another full time rig in Q1’16. The Monroe acreage has a 10 well per year drilling commitment and is approximately 85% held by production, with a net revenue interest of approximately 84%.
Full-year 2015 guidance, not including the AEU deal, is 432 to 480 MMcfe/d. Firm transportation commitments will reach 1,262 MMcfe/d by year-end 2017.
American Energy Partners Update and the Emergence of Ascent Resources
Aside from some recent notes exchanges across its subsidiaries, this is the first time American Energy Partners has made headlines since its primary investor, Energy & Minerals Group, settled a lawsuit with Chesapeake Energy (ticker: CHK) in April. Shortly after the Gulfport news release, AEU announced the raising of an additional $977 million in debt and equity financing. Furthermore, AEU rebranded itself as Ascent Resources, LLC, and will have $700 million in liquidity after paying off certain existing debt.
The latest development is yet another interesting twist to a possible disconnect between McClendon and the various investors of American Energy Partners. Earlier this year, Chesapeake alleged McClendon stole confidential land leasing documents and maps prior to his ouster from the company in early 2013. McClendon went on to found American Energy Partners later in the year and has raised more than $14 billion last fall.
Energy & Minerals Group, a sizable stakeholder in AEU, went against McClendon’s will in paying off Chesapeake, which included a payment of $25 million and 6,000 acres in the Utica Shale. American Energy Partners had choice words in a press release. “Although Mr. McClendon is a director and the single largest non-institutional shareholder in AEU, he did not approve the settlement and neither he nor AELP were advised of the negotiated terms of this settlement,” the release says. McClendon remains mired in a separate, existing dispute with Chesapeake as the owner of the consortium company.