The Utica and Eagle Ford shale plays share some important characteristics. Both have three distinct windows, where oil, wet gas and dry gas have migrated from west to east. Both have made headlines in the past year, with major deals involving deep-pocketed foreign suitors. And both plays have provided their operators with coveted oil positions as natural gas prices hover around $2.50 per MMBtu and oil flirts with $100 per barrel.
Yet the similarities end there, because the resource base and players are different.
A revealing comparison between these plays is their rising acreage costs as companies seek liquids-rich acreage positions. In the Eagle Ford, a $15.1-billion deal for Petrohawk Energy brought BHP Billiton into South Texas in midyear 2011. But assigning acreage costs to this deal is impossible, because the Aussie mining giant bought Petrohawk outright.
Instead, the bellwether acreage deal in the Eagle Ford was Marathon's acquisition of Hilcorp Resources Holdings, announced on June 15, 2011, for $3.6 billion in cash. Marathon acquired 141,000 net acres in four South Texas coun-
Permian Basin ties that contain oil/condensate,
25% natural gas liquids, and dry gas.
Cardium According to Jack Aydin of Key-
3% Banc Capital Markets, Marathon
Utica paid some $21,000 per acre.
3% While Marathon and BHP Billiton were scooping up acreage, SM Energy sold roughly 100,000 Appalachia acres for almost $1 billion to help finance development of its Eagle Ford assets. According to SM Energy's president and chief executive, Tony Best, the "funds will allow us to develop our Eagle Ford assets while locking in some solid returns and maintaining a strong balance sheet."
SM's deals also brought in foreign companies—Mitsui, Statoil and Talisman Energy—that are eager to learn more about North American shale plays.
Another way Eagle Ford players are bankrolling drilling and completions is to form joint ventures. Anadarko Petroleum took this route when it signed a $1.55-billion deal with Korea National Oil Corp. (KNOC) allowing the international to earn roughly one-third of Anadarko's interest in its South Texas basins.
According to KeyBanc's Aydin, deal values prior to the Mitsui deal with SM Energy had averaged $12,000 to $13,000 per acre. The Mitsui deal pushed the price up to $17,000 to $18,000. And the Marathon deal has raised the market once more, to roughly $23,000 to $25,000 per acre.
Acreage had been selling at $4,000 to $5,000 since first-quarter 2010, notes Hart Energy's first "Eagle Ford Playbook."
While the Eagle Ford was receiving most of the media attention, E&P companies were turning their attention away from the Marcellus shale and peering instead over the border into Ohio. At year-end 2009, EV Energy Partners and EverVest Ltd. acquired Ohio and northwest Pennsylvania producing assets from Exco Resources. By midyear 2010, Royal Dutch Shell had acquired East Resources' assets for $4.7 billion, including acreage in the Utica. Atlas Energy was acquired by Chevron in November 2010 for $3.2 billion, including significant acreage in Ohio. ExxonMobil and Anadarko also entered the play. And by November 2010, Chesapeake Energy had acquired acreage from Anschutz Exploration at $1,200 to $1,500 per acre.
In February 2011, Gulfport Energy and Windsor Energy acquired Utica acreage for some $2,300 per acre. By August of that year, Rex Energy had acquired holdings in Ohio for about $3,600 per acre. By September, prices went significantly higher with Hess Corp.'s joint venture with Consol Energy valued at $5,930 per acre, and its acquisition of Marquette Exploration with Utica acreage costs rising to $8,824 per acre.
The Utica shale made front page news in early January when Total, France's largest E&P, acquired an undivided 25% interest in 619,000 acres from Chesapeake and Ener-Vest in 10 counties in Ohio. Total paid $2.32 billion in up-front costs and carry fees, with Chesapeake receiving $2.03 billion and EnerVest, $290 million. Total paid about $15,000 per acre.
Although not as high as acreage prices in the Eagle Ford, the Utica has emerged in 2012 as the hot new play. Yet, future deal making in the Utica will be tempered by the fact that most of the oil/condensate and wet-gas acreage positions are owned by deep-pocketed companies. The A&D spotlight will probably shift back to the Eagle Ford and other emerging oilier plays.
For more on Eagle Ford and Utica shale A&D, see A-Dcenter.com.
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