To form JV to explore and develop 52,500 gross acres in the Delaware Basin.
Quicksilver Resources Inc. (NYSE: KWK) and Eni are partnering again, this time to jointly evaluate, explore and develop about 52,500 gross acres in the Delaware Basin.
The acreage is held by Quicksilver in the Leon Valley area located in Pecos County, Texas. Eni, an Italian integrated company focused on E&P, will pay up to $52 million, representing 100% of drilling, completion and seismic costs to earn a 50% interest in Quicksilver's Pecos acreage.
The companies already work part of the Fort Worth Basin together.
Eni has agreed to invest in drilling and completion of up to three wells by June 2014. Funding by Eni gives the company 50% of Quicksilver's interest in a 7,500 gross-acre tract also located in the Leon Valley area.
Eni will then have the option to fund the drilling and completion of two additional wells and commit to a 3-D seismic survey in order to fully earn a 50% interest in Quicksilver's Pecos County acreage.
After Eni's $52 million investment, the parties will equally share in future revenue, operating costs and capital expenditures.
The companies will form a joint evaluation team for exploration and development, with Quicksilver acting as designated operator.
“We are pleased to expand Quicksilver's working relationship with Eni to our West Texas project,” said Glenn Darden, Quicksilver president and CEO. “Eni has been an excellent partner that has helped us enhance the recovery of the gas reserves in the Alliance area of our Barnett development, and we look forward to success on the oil side in the Delaware Basin.”
In 2009, Eni signed an agreement with Quicksilver and has a 27.5% participating interest in the development of the Alliance area, which produces non-conventional gas from the Barnett shale within the Fort Worth Basin in Texas.
Quicksilver has about 12,000 net acres there and a 48% net revenue interest. For the whole of the Fort Worth basin, Quicksilver’s capex is $50-$60 million.
The Leon Valley acreage is located in the prolific Delaware Basin, where current production amounts to nearly 500,000 barrels of oil equivalent per day both from conventional and unconventional reservoirs. It is estimated that within five years the Delaware Basin production will double, due to the rapid growth of oil production from unconventional reservoirs.
Eni said the project allows it to enter into one of the prolific unconventional shale oil plays in the U.S. through organic growth and with a phased investment program.
In the United States Eni holds a working interest in 777 leases, of which 233 are in the Gulf of Mexico mostly in deepwater, 107 are in the North Slope of Alaska and 437 are onshore in Texas, where the company produces unconventional gas from the Barnett shale in partnership with Quicksilver. Eni’s current U.S. net daily production exceeds 90,000 barrels of oil equivalent (BOE), 70% of which is operated by Eni.
Quicksilver is based in Fort Worth, Texas. The company also said Nov. 5 that it is in negotiations with select partners for its integrated Horn River project. A third-party reserve analyst estimates Quicksilver's 129,000 acres in the Horn River Basin in Northeast British Columbia holds up to 14 trillion cubic feet (Tcf) of natural gas reserve potential.
The acreage is served by existing pipelines and treating facilities, and based on location and size of resource is believed to be ideally suited as a long-term feedstock for LNG exports, the company said.