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$690 Million Deal Moves Ahead: Crescent Energy to Complete Purchase of EP Energy's Uinta Assets
04/06/2022
On March 30, Crescent Energy closed the acquisition of Uinta Basin assets in Utah that were previously owned by EP Energy for $690 million, a few hundred million dollars below the original price. While a total cash consideration of about $815 million was announced at the time of the transaction's announcement back in February.
At least according to Crescent CEO David Rockecharlie, the accretive deal increases Crescent's Rockies position and adds significant cash flow and a portfolio of high-quality oil-weighted undeveloped sites.
Crescent's acquisition of Uinta indicates its competitive strength and ability to simultaneously deliver shareholder value through accretive acquisitions and to create long-term value for its shareholders through the consolidation of its businesses in today's market.
Upon closing of the Uinta transaction, Crescent's lenders increased the borrowing base under the revolving credit facility to $1.8 billion and the committed amount to $1.3 billion, an increase of $600 million from its previous level.
EP Energy had owned these assets earlier, according to a news release from Crescent Energy on Feb. 16 that was dedicated to the Uinta acquisition. The Uinta comprises about 145,000 contiguous net acres, most of it producing oil (roughly 65%), about 30,000 boe/d.
A year after EP Energy emerged from a bankruptcy process that handed control to its creditors, EnCap Investments agreed to take over EP Energy's assets in the Eagle Ford and Uinta basins for $1.55 billion.
Although U.S. antitrust regulators threatened to hinder EnCap's acquisition of EP Energy, citing the private equity firm's dominant position in the Uinta shale formation as a concern.
According to Reuters, the U.S. government agencies finally approved EnCap's $1.5 billion purchase of EP Energy on the condition that EP Energy's entire Utah oil business be sold. If the assets from Utah hadn't been sold, there would have been just three producers that sell Uinta Basin crude oil to refineries in Salt Lake City, and consumers would have paid more in prices.
Crescent Energy was formed in December when Contango Oil & Gas and KKR went for an all-stock merge. KKR remains the company's partner, but Contango serves as its subsidiary as it manages a portfolio of assets in the Lower 48.
Having completed the Uinta acquisition, Crescent Energy expects to operate two rigs off Uinta for the remainder of the year. In addition to its acquired Uinta assets, Crescent's pro forma year-end 2021 provided reserves totaled 598 million boe, of which 83% was developed, 55% was liquid, and its provided PV-10 was $6.2 billion. Based on the production type curves used in Crescent's third-party reserve reports, a 22% decline rate for its proved developed producing reserves is expected for the first year.
Moreover, on March 30, the company reiterated its previously announced capital investment strategy and production and cost guidance for 2022. Investments in the Eagle Ford and Uinta basins will account for 80%-85% of the $600 million-$700 million capital program for 2022.
Concerning the Uinta acquisition, the Company added additional oil hedges as part of its risk management practices. Together with the expected Uinta volumes, Crescent now has derivative agreements in place covering approximately 60% of its expected total production in 2022.
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To Be or Not To Be: Bakken Assets Could Fetch $5 Billion for Exxon Mobil
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Exxon Mobil Corp. is weighing prospects of selling its assets in North Dakota’s Bakken, after gauging interest from potential buyers — 5 billion is the issue price, at least according to rumors. The price point came about after the news that the oilgiant is in the final round of hiring bankers to help launch the sale. Yet Exxon Mobil itself stays tight-lipped regarding the situation.
As Countries Shun Russian Crude, Canada Plans to Boost Its Oil Exports
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Canada is looking at ways to increase pipeline utilization to boost crude exports as Europe seeks to reduce its reliance on Russian oil At the moment, oil exports from Canada to the U.S. are approximately 4 million barrels of oil per day, with a portion reexported to other countries. At the end of 2021 Canadian oil companies exported a record amount of crude from the U.S. Gulf Coast, mostly to big importers India, China, and South Korea. And this will only increase in the future.
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Shareholder’s payout target was increased by 50% after the largest U.S. independent oil producer surpassed Wall Street’s earnings estimates on growing energy prices, said Houston-based Conoco Phillips Co. on Aug. 4. Due to Western sanctions on major producer Russia throttling energy supply amid a rebound in demand from pandemic lows, oil and gas #prices have soared. Crude has been trading more than 25% higher since the start of the year and results also benefited from high natural gas prices. Meanwhile, shares were down a fraction, to $91.03, in early trading but are up about 26% year to date. Conoco Phillips stated, that the average price obtained for a barrel of oil and gas accelerated 77% from a year earlier to $88.57. The company acknowledges that it has not hedged any of its oil and gas sales to make the most of higher market prices. The capacity of 1.69 million boe/d was in line with Wall Street estimates, however, the company expected the current quarter’s output would be between 1.71 million and 1.76 million boe/d.
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California oil joint venture, Aera Energy, of Exxon Mobil Corp. and ShellPlc is being sold to German asset manager IKAV, according to the agreement of Sept. 1. Shell noted that the sale of its 51.8% membership interest in Aera Energy is for a total consideration of about $2 billion in cash with additional contingent payments based on future oil prices, subject to regulatory approval. However, the total transaction value was not disclosed. Being one of California’s largest oil and gas producers, Aera Energy accounts for nearly 25% of the state’s production. The sale by Exxon Mobil and Shell ends a 25-year-long partnership in California, meanwhile, it persists a streak of divestments of mature oil and gas properties by the two supermajors. Aera Energy LLC operates about 13,000 wells in the San Joaquin Valley in California, producing oil and associated gas. In 2021, Aera took out about 95,000 boe/d. Exxon Mobil’s interests in the Aera oil-production operation in California contained a 48.2% share of Aera Energy LLC and a 50% share of Aera Energy Services Co. held by Mobil California Exploration & Producing Co. Moreover, Exxon Mobil affiliates have signed a separate agreement for the sale of an associated loading facility and pipeline system. The sale effectively ends Shell’s upstream position in California. The company reported that the divestiture is valued to result in a post-tax impairment of $300 million to $400 million, subject to adjustments.
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The completion of the merger between Centennial Resource Development Inc. and Colgate Energy Partners II LLC happened on Sept. 1, sealing the debut of Permian Resources Corp., which is considered the largest pure-play E&P company in the Delaware Basin. Permian Resources’ idea was to combine two successful E&P companies, creating a better, stronger, and more strategically compelling company. Centennial and Colgate announced an agreement to merge in May, denying rumors that Colgate, a privately held independent Midland-based company, had been seeking an IPO. The merger estimated Colgate at about $3.9 billion and consists of 269.3 million shares of Centennial stock, $525 million of cash, and the assumption of approximately $1.4 billion of Colgate’s outstanding net debt. Permian Resources, being the combined company, has a deep inventory of “high-quality” drilling locations on around 180,000 net acres the companies anticipate will provide more than $1 billion of free cash flow in 2023 at current strip prices, in accordance with the company release on Sept. 1.