Southwestern Energy to acquire Marcellus, Utica assets for $5.375 billion

Southwestern Energy Co., Houston, has agreed to acquire assets in the southern Marcellus shale and a portion of the eastern Utica shale in West Virginia from Chesapeake Energy Corp., Oklahoma City, for $5.375 billion.

The deal, expected to close in the fourth quarter, encompasses 413,000 net acres and 1,500 wells in northern West Virginia and southern Pennsylvania along with related property, plant, and equipment. Average working interest in the properties is 67.5%.

Of a total of 435 horizontal wells, 256 are operated and producing in the Marcellus and Utica and an additional 179 are nonoperated or nonproducing in the Marcellus and Utica.

Net production in September totaled 336 MMcfd of gas equivalent, of which 55% is gas, 36% are NGLs, and 9% is oil. As of Dec. 31, 2013, net proved reserves associated with these properties totaled 221 million boe.

Southwestern Energy will assume a portion of Chesapeake’s firm transportation and processing capacity commitments. Based on capacity and expected future commitments, the company’s preliminary plans are to begin with 4-6 rigs next year and increase to 11 rigs by 2017.

Southwestern Energy estimates that it can drill for a minimum of 20 years maintaining that 11-rig pace. By yearend 2017, the reserve mix for the company is estimated to be one-third each for the Fayetteville, northeast Marcellus, and the newly acquired West Virginia and Pennsylvania properties, compared with two-thirds for the Fayetteville and one-third northeast Marcellus as of the day the deal took place.

Southwestern previously purchased 162,000 net acres in the Marcellus from Chesapeake for $93 million, giving Southwestern Energy 337,000 net acres in the play upon closing of the deal (OGJ Online, Apr. 30, 2013). Earlier this year, Southwestern Energy agreed to purchase 312,000 net acres in the Niobrara shale from Quicksilver Resources Inc. and Swepi LP, a unit of Royal Dutch Shell PLC, for $180 million (OGJ Online, Mar. 7, 2014).

Doug Lawler, Chesapeake’s chief executive officer, commented on the sale from his company’s perspective, “It’s important to note that this transaction has no impact on our expected growth profile or on our views around maintaining a disciplined capital program. We expect our full-year production guidance for 2015 to remain in the range of 7-10% growth from 2014 levels adjusted for asset sales.”

As of May, the total value of sales and divestitures for the year made by Chesapeake totaled more than $4 billion (OGJ Online, May 16, 2014).

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