Huron, Utica properties changing hands
After a slow quarter, Appalachian M&A activity closed out Q2 with large deals today, with a combined value of $2.1 billion.
EQT and Diversified
EQT (ticker: EQT) announced the sale of its large Huron assets today, divesting 2.5 million acres for $575 million in cash. The assets have been extensively developed, and EQT reports there are about 12,000 wells producing from the area with 6,400 miles of gathering lines and 59 compression stations. The sold acreage has 1.6 Tcfe of proved reserves, and total output of 200 MMcfe/d, or 33.3 MBOEPD. EQT reports the sale also eliminates about $200 million in decommissioning liabilities.
The Huron play is a conventional gas play located south of the heart of the Marcellus. The sold acreage is in Kentucky, Virginia and southern West Virginia, while most Marcellus drilling is in Pennsylvania. The Huron is located above the Marcellus, so EQT’s retention of deep drilling rights on the acreage may be significant, it can still drill the Marcellus in that area if it chooses to do so.
Diversified Gas & Oil (ticker: DGOC), which is based in the U.S. but traded in London, is the buyer. While this is not a major transaction for EQT, as the company is focusing on its Marcellus acreage, it is a major change for Diversified. The company is currently producing a net 169 MMcfe/d, so the acquisition more than doubles Diversified’s output. Diversified also currently holds reserves of 935 Bcfe, so the buy increases the company’s reserves by a similar margin.
Based on a purchase price of $575 million, Diversified paid $2,875 per flowing Mcfe, or $0.36 per Mcfe of reserves.
Ascent Resources pays $1.5 billion to four companies
Privately-held Ascent Resources has been on a buying spree in Appalachia, and announced four transactions today. The company will acquire assets from Hess, CNX Resources, Utica Minerals Development and a fourth seller that was not disclosed. In total, Ascent plans to pay $1.5 billion for its new assets.
Ascent will acquire 113,400 leasehold acres and royalty interest on 69,400 acres, which cover the core of the Utica. These assets include 93 operated wells and are producing 216 MMcfe/d, 19% of which is liquids. Ascent estimates it added more than 380 gross drilling locations and increased its working interest in more than 900 gross locations. The new assets have proved reserves of about 1.1 Tcfe, with total resource of about 5.6 Tcfe.
Hess and CNX both provided some details on the assets sold, privately-held Utica Minerals Development did not. Hess and CNX sold a 50-50 JV in the Ohio Utica for a combined $800 million. The overall venture holds 78,000 net acres, 52,000 of these are undeveloped. The assets are currently producing 169 MMcfe/d from 100 wells. The venture recently completed five wells that are on track to begin producing in July, but no other drilling is planned this year.
Hess and CNX each received $400 million, and both companies already have plans to use the funds. Hess intends to invest in its Guyana and Bakken properties, with some additional funds going toward repurchasing shares. CNX will primarily use the proceeds to pay down debt, but will also repurchase shares and pay for drilling and completions.
Ascent is a major Appalachian producer
Ascent has become a major player in the Appalachian, and holds 310,000 net acres and royalty interest on 70,650 acres, pro forma for the acquisitions. Including the acquired properties Ascent is producing about 1.5 Bcfe/d, with proved reserves of 5.9 Tcfe.
For reference, Cabot Oil & Gas (ticker: COG), a company with a market cap of $10.8 billion, produced about 1.88 Bcfe/d last quarter and has reserves of 9.7 Tcfe. Range Resources (ticker: RRC), another major Appalachian player, is currently producing 2.19 Bcfe/d and has reserves of 15.3 Tcfe with a market cap of $4.2 billion. Cabot and Range are presenters at The Oil & Gas Conference ® which is in Denver August 19-23, 2018. Registration information for the conference is available at the conference website.
