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Shell sells Eagle Ford acreage for $639 million

The company is selling acreage in south Texas to Sanchez Energy Corporation

Shell is selling its Eagle Ford acreage in south Texas as part of its North American shale divestment programme. On 21 May, the Anglo-Dutch supermajor announced it has agreed to sell its 100% stake in 106,000 net acres in Dimmit, LaSalle, and Webb counties to Sanchez Energy Corporation for $639 million. The sale includes 176 operated, producing wells and associated field facilities and infrastructure.

Shell said its net production in the first quarter of 2014 was around 24,000 barrels of oil equivalent per day (boe/d). Around 60% of this was crude and natural gas liquids. The deal is effective from 1 January and is expected to close at the end of the second quarter. Shell said the sale is part of its restructuring of its North American shale oil and gas plays to focus on acreage which can reach large-scale production.

In September, Shell sold its acreage in the Mississippi Lime play in Kansas, its Utica shale position in Ohio and a portion of its acreage in the Sandwash Niobrara basins in Colorado as part of this strategy. 

Shell’s first quarter 2014 financial earning plunged by almost 50% compared to year-earlier levels at $4.5 billion. This is down from $8bn for the first quarter of 2013. The company blamed exploration write-offs, higher costs and a $2.2bn charge on its downstream earnings related to refineries in Asia and Europe for the first-quarter loss.

Shell has invested around $24bn in US unconventional oil and gas projects which the company has struggled to make profitable. Peter Voser, Shell’s former chief executive, said in August the company would review its US shale acreage after it suffered a $2.1bn write-down in the value of its North American assets. 

Meanwhile ExxonMobil has increased its North American acreage through an asset swap with Linn Energy. On 21 May ExxonMobil announced it will acquire almost 26,000 acres of Linn’s acreage in the Midland basin, which straddles west Texas and southeastern New Mexico. XTO Energy, an ExxonMobil subsidiary, will manage the new acreage.

XTO will receive 25,000 net acres in the northern Midland core area, which will enable it to further develop the Wolfcamp and Spraberry projects. It will also gain 1,000 net acres in the New Mexico Delaware basin. In return, Linn will receive a portion of ExxonMobil’s interest in the Hugoton gasfield in Kansas and Oklahoma. The size of the stake included in teh deal has not been disclosed. XTO’s current production there is around 85m cubic feet per day, 80% of which is natural gas. 

Randy Cleveland, XTO’s president, said: “The Midland basin is in a prolific area where we expect rapid, profitable development of multiple horizons in the Wolfcamp and Spraberry formations.”

In February, XTO entered into a deal with Endeavor Energy Resources to buy a stake in 34,000 acres in the Wolfcamp formation. Under the terms of the agreement, Endeavor will continue to operate shallow production, while XTO will drill horizontal wells in the deeper sections to maximise output.

Cleveland said the Endeavor deal and Linn asset swap would increase XTO’s holdings in the Midland basin Wolfcamp to around 300,000 net acres. He added it also increases XTO’s total acreage in the Permian basin to more than 1.5m acres.

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