Argentina has passed legislation expropriating a 51% share in YPF from Repsol and declaring the oil and gas industry to be of "national public interest". The terms of compensation for Repsol's shares remain undetermined.
This latest move highlights the impact high oil prices have in terms of limiting access by international oil companies to oil and gas resources.
Under the combined impact of unusually warm weather and ballooning supply, natural gas prices have taken a beating this winter in North America. Recent announcements by Chesapeake Energy and ConocoPhillips that they will cut gas drilling operations is an important first step towards shoring up the beleaguered price of natural gas. We even saw a short term bump in price immediately following.
But will this be enough to ease the pain? Our research suggests not.
A US$2.5 billion joint venture alliance between Devon Energy and Sinopec has been announced. Sinopec will acquire a 33.33% interest in Devon's acreage across five new venture plays. The alliance includes an estimated 1.2 million acres in the Tuscaloosa Marine Shale, Niobrara, Oklahoma Mississippian play, Ohio Utica shale, and the Michigan Basin. The Niobrara, Mississippian and Utica shale acreage is liquids weighted. The Michigan and Tuscaloosa acreage includes both oil and gas. The distribution of total acreage contributed to the alliance by play is shown below.
In a US$15.1 billion deal, BHP Billiton will acquire Petrohawk Energy shares for US$12.1 billion and assume $3 billion in Petrohawk debt. This deal follows BHP's prior acquisition of Chesapeake's Fayetteville shale operations at a cost of US$4.75 billion. The combined effect of these two transactions is to establish North American unconventional gas as a key driver of future BHP Billiton growth.
With operations concentrated in the much coveted Eagle Ford and Haynesville plays, estimated net production of 950 Mmcfe/d, and proved reserves of 3.4 Tcfe, the transaction has been made at a per acre cost of US$15,100. This places the deal in the 80th percentile of a sample of 21 Eagle Ford deals made in 2010 and 2011 and roughly comparable to prior transaction values in the Haynesville.
In a surprising move EnCana and PetroChina have agreed to end negotiations to create a joint venture alliance on EnCana's Cutbank Ridge unconventional gas acreage in Canada. The companies stated that this decision was taken because "... the parties were unable to achieve substantial alignment with respect to key elements of the proposed transaction, including the joint operating agreement."
In a US$1.1 billion deal, Petronas has entered a JV alliance with Progress Energy Resources in the Montney shale gas play in British Columbia. Petronas will pay US$275 million up front and carry 75% of Progress' share of capital costs over the next five years up to a maximum of another US$827.3 million. Petronas will acquire a 50% working interest in 149,910 acres implying a per acre cost to Petronas of US$14,717. Progress will retain its interest in its remaining 750,000 net acres in British Columbia and Alberta.
In a US$3.5 billion deal to buy Hilcorp Resources Eagle Ford acreage Marathon reaffirms the critically important role of onshore North American operations in the future growth plans of the International Oil Companies (IOCs). The transaction will add 141,000 net acres to Marathon's position in the play. The company reported that it will operate 90% of the acreage and will hold, on average, a 65% working interest.
In its recent investor presentation, ExxonMobil announced plans to double US unconventional gas production by 2010 compared to the pro forma combined volumes of ExxonMobil and XTO in 2010. This translates into a roughly 3 bcf/d increase in gas volumes from unconventional US sources.
The implied 7% CAGR in unconventional gas supplies from ExxonMobil is essentially derived entirely from shale gas with tight gas and CBM expected to remain relatively unchanged.
Chesapeake recently announced plans to divest all of its Fayetteville shale assets with expectations that it will capture in excess of US$5 billion in pre-tax proceeds from the sale. Proceeds are expected to be used to retire senior notes and borrowings under a revolving bank credit facility.
The assets include its 487,000 net acres in the play plus its equity interests in Frac Tech Holdings, LLC (25.8%) and Chaparral Energy (20%).
BHP Billiton agreed to acquire Chesapeake's Fayetteville assets for US$4.75 billion. It should be noted that Chesapeake has agreed, as part of the deal, to "provide essential services for up to one year for BHP Billiton's properties" for an unspecified fee. BHP Billiton also announced an A$5 billion share repurchase program.
The rest of this article discusses the Chesapeake assets including key operational parameter estimates and the economics of the BHP Billion acquisition and is reserved for premium subscribers...
Nexen announced plans to follow EnCana's lead by seeking out a JV alliance to develop 300,000 shale gas acres in British Columbia. Nexen holds a 100% interest in the acreage at this time and it acquired 175,000 acres in 2010 in the Cordova and Liard basins. The company is at an early stage of development of its land position.
Including the land acquisition costs, Nexen invested C$476 million in shale gas (slightly less than half on wells and facilities with the remainder land acquisition costs).
Nexen's goals are to (1) monetize part of the value in its acreage and (2) find a partner interested in developing the resource potential over a 40 year time horizon.
