Statoil ASA and Brigham Exploration Co. recently unveiled plans for a merger agreement for Statoil to acquire all outstanding shares of Brigham for $36.5 per share through an all-cash tender offer. Total equity value of the deal is about $4.4 billion, reflecting an enterprise value of about $4.7 billion, based on net debt in June 2011.
Brigham, based in Austin, Texas, has a strong position in the Bakken and Three Forks tight oil plays in the Williston Basin in North Dakota and Montana. The transaction will provide Statoil with more than 375,000 net acres in the venerable Williston Basin, which holds potential for further oil production.
Regarding the deal, Helge Lund, president and chief executive of Statoil says, "Statoil has developed industrial capabilities through early entrance into the Marcellus and Eagle Ford. Entering the Bakken and Three Forks tight oil plays and taking on ownership represents a significant step for Statoil as a leading player."
Bill Maloney, North American executive vice president of Statoil, says, "We see this as a progressive step, growing the unconventional business. Infrastructure there is an issue for some. In the past couple of years, Brigham has invested about $120 million a year on building up their infrastructure; they use a combination of all things. They use pipelines primarily, but they also use trucks and rail. We do have a marketing organization based in Stamford, Connecticut, and we plan on connecting up that expertise with what is done with Brigham."
The Bakken and Three Forks formations are among the largest oil accumulations in the U.S., and estimates peg the technically recoverable reserves to be in the range of 5- to 24-billion barrels of oil equivalent over a 15,000-square-mile area. With this expectation for recoverable reserves, midstream take-away capacity will almost certainly need to be increased in the area.
"We plan on increasing our ability to take away, and I think we've done that in the Marcellus, as an example. When we went into the Marcellus, we decided that we needed Statoil take-away capacity, so we now have the ability to take gas up to Toronto and the ability to take gas up into the New York City area. Inside this play, in the Bakken, we plan to try to do a lot of the marketing on our own," he says.
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