CNOOC, Statoil snap up Eagle Ford assets
STATOIL and CNOOC are buying into Texas' Eagle Ford Shale in deals with a combined value of $3.5bn, proving shale-gas acreage is still hot property
Norway's Statoil is teaming up with Canadian Talisman Energy to spend $1.3bn on 97,000 acres in Texas's liquids-rich Eagle Ford play from local producer Enduring Resources, including 5,500 barrels of oil equivalent a day (boe/d) of existing production. The companies are paying about $10,900 an acre for land Talisman says could hold 0.8bn boe, of which 50% is expected to be condensate, or natural gas liquids. Full-cycle breakeven costs will be around $4/'000 cubic feet, it says.
Talisman will operate the project initially, with Statoil taking charge of 50% of the acreage within three years. Statoil will also buy 50% of Talisman's existing 37,000 acres in the Eagle Ford for $180m as part of the deal. The transaction will leave the joint venture with 134,000 net acres in the Eagle Ford. John Manzoni, Talisman's chief executive, says the joint venture is an "excellent fit" with the company's strategy to increase its unconventional-gas position in North America. Statoil says the "magnitude" of North America's gas resources made the deal an "attractive opportunity".
Talisman already owns land in the Marcellus play, in Pennsylvania, and the Montney and Utica shales in Canada. It says a land-acquisition programme in the past two years has left it with an inventory of drilling locations that will last a decade. Talisman is also developing shale-gas in Poland, with production targeted for 2013.
Statoil expects much of the revenue from the Eagle Ford venture to come from liquids production, which, because of the play's proximity to Texas's refining and petrochemicals industries – and depressed natural gas prices in the US – makes the acreage highly valuable.
CNOOC, meanwhile, is buying a third of Chesapeake Energy's Eagle Ford acreage for $1.1bn and will also fund 75% of Chesapeake's drilling and completion costs on the land, which amounts to 0.6m acres, up to an additional cost of $1.1bn. As part of the deal, it will also hold the right to buy a third of any other acreage Chesapeake acquires in the area.
Chesapeake has 10 horizontal wells in operation in Eagle Ford, with production rates of up to 1,160 barrels a day of oil and 3.5m cf/d of gas. CNOOC aims to drill 900 wells by the end of 2012, targeting peak production of up to 0.5m boe/d. The deal will enable Chesapeake to quadruple the number of wells it operates in the acreage. It says the venture with CNOOC will target up to 4bn boe of net unrisked, unproved resource potential.
Chesapeake's strong shale-gas acreage position in the US includes 2.8m net acres spread across the Barnett, Fayetteville, Haynesville, Marcellus and Bossier plays. But debt and weak cash flow have forced it into a string of joint ventures in the past two years, with BP, Statoil and Total among its partners. The company said in May that it planned to raise $3.5bn to pay off its debts. With US natural gas prices depressed, it has also been building a position in unconventional oil, including its holding in the liquids-rich Eagle Ford.
Yang Hua, an executive at CNOOC, says the deal will benefit the company's "long-term production and reserves growth" strategy, while also allowing it to tap the US company's "abundant experience on drilling and completion in various US shale plays". This should help the company domestically, where the International Energy Agency estimates China's shale-gas reserves to be 26 trillion cm. The government wants output from this resource to reach 15bn-30bn cm/y by 2020.