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Restructuration is in a full-speed: Comstock to sell Bakken for $154 million10/15/21
A $154 million cash purchase agreement has been reached between Northern Oil and Gas and Comstock Resources for the Bakken assets. It expects that deal will go through before the end of November, funded by cash on hand, operating free cash flow, and borrowings under the Northerns revolving credit facility.
The proceeds from these sales will be reinvested by Comstock Resources Inc. into the Haynesville Shale, at which point the company may acquire additional leasehold and fund drilling activities starting in 2022.
This move by Comstock comes as deal activity rises in Louisiana's Haynesville Shale, where Comstock produces most of its energy. There was some expectation this outcome would happen since some oil and gas producers have been looking to sell assets to take advantage of higher commodity prices and to bolster cash reserves on their balance sheets to counter investor pressure for a while now.
In retrospect, the buyer, Northern Oil and Gas Inc., is the one who is going against the herd with the third big purchase in a row. The company acquired some non-operated interests in Texas' Permian Basin for about $102 million and in Pennsylvania's gas-rich Marcellus basin for $126 million earlier this year.
The Bakken assets purchased by Northern are composed of non-operated interests in 436 producing wellbores in North Dakota's counties of Williams, McKenzie, Mountrail, and Dunn, but being operated from the Williston Basin. With a recent six-month average landed production of 6,400 bbl/d from the 427 actually active wells, and an estimate for October alone surpassing 4,500 boe/d, this deal shapes up to be quite a steal.
The company is based in Minnetonka, Minnesota, and attempts to serve as the ideal provider of non-operated working interests in leasehold that operators can avail themselves of. Yet with acquisitions over the past year in the Marcellus Shale and Permian Basin, the firm’s appetite has begun to diversify and grow outside of the Williston Basin, now fully intending to take a bite of Texas shale play.
Northern Oil and Gas Inc.'s borrowing base will increase significantly from this acquisition atop its existing assets. The company expects to fully determine its borrowing base in the mid-fall, ahead of its regularly scheduled redetermination. With a successful outcome in place, Northern will have doubled its shareholder return program in less than five months providing a formidable showing.
With respect to Comstock, it expects to take a pre-tax loss of $130 million to $140 million from this divestiture and will use the sale proceeds to further develop the Haynesville Shale, including speeding up construction on the 13 new DUC wells originally planned for 2022. Acquisition of additional leasehold, as well as funding of extra drilling, is not completely out of the question either.
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Pioneer Natural resources is looking to divest properties in the lone star state. According to Rextag, Pioneer’s Delaware assets on sale have a trailing 12 month production of just over 22 MBOE against a total Permian Basin production of almost 212 MBOE. (The sale, if it happens, will effectively lead to a 10% decrease of Pioneer’s asset base in terms of the previous year's production.)
A good asset will not sit on the market for long. After a deal with Berkshire Hathaway fell through, Dominion Energy managed to secure another one for Questar Pipelines in a drop of a hat. And get that, it is better than the former one by more than half a billion! Although not everyone is happy with such decisions, it seems that even Carl Icahn’s complaints won't be able to sway Southwest Gas Holdings’ decision. Though we will have our eyes peeled in any case… If everything goes as planned, a $2 billion deal will be closed before the end of the year.
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.
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.
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.