Antero Resources Corp., Denver, has agreed to acquire 55,000 net acres of undeveloped Marcellus shale leasehold, including deep rights on 41,000 net acres prospective for the underlying dry Utica, and 14 MMcfed of net production from Southwestern Energy Co., Houston, for $450 million.
The acreage is in Doddridge, Harrison, Marion, Monongalia, Pleasants, Ritchie, Tyler, and Wetzel counties in West Virginia, with proved reserves of 11 bcfe as of Dec. 31, 2015. The deal is effective Jan. 1 and expected to close in the third quarter.
About 75% of the acquired acreage is in Antero’s rich gas, highly rich gas, and highly rich gas-condensate regimes, with the remaining 25% in the dry gas regime. Antero estimates the undeveloped properties include 4.1 tcfe of unaudited Marcellus 3P reserves and 1.8 tcf of dry Utica resource potential.
The deal adds 625 identified 3P locations and enhances 435 existing 3P locations by incremental working interests or increased lateral length, Antero notes. The lateral length of the new or enhanced identified 3P locations averages 9,300 ft.
Also as part of the deal, a third party has a 30-day tag along option to sell the remaining 19% average working interest in the acquired properties to Antero, or an additional 13,000 net acres, under the same terms. The tag along acreage includes 1 tcfe of unaudited Marcellus 3P reserves, 400 bcf of dry Utica resource, and 3 MMcfed of net production.
If the tag along option is exercised by the third party, the adjusted acquisition price is estimated at $560 million.
“The transaction creates a new platform for development and consolidation in Wetzel County, with attractive rich and dry gas Marcellus locations, as well as stacked pay potential for the dry Utica,” said Paul Rady, Antero chairman and chief executive officer.
“Additionally, this acquired acreage is able to access our firm transportation portfolio and thus move incremental production to currently favorable markets,” Rady said. “Similar to the successful strategy that we deployed in Tyler County, we expect to further consolidate acreage in Wetzel County and build out the necessary midstream infrastructure to move our gas to market,” he said.
Pro forma for the acquisition, Antero’s Marcellus leasehold position includes more than 480,000 net acres and 3P reserves of 33.7 tcfe.
“Due to the savings achieved year-to-date from service cost reductions and operating efficiencies, we expect to add an additional rig in the second half of the year while maintaining our original drilling and completion budget of $1.3 billion,” commented Glen Warren, president and chief financial officer.
“The additional rig, which will focus primarily on Tyler County, enables Antero to accelerate production so that we believe we can generate 20% to 25% year-over-year growth 2017 with a minimal increase to the 2017 drilling and completion capital budget compared to 2016,” Warren explained.
For Southwestern, cash proceeds from the deal are expected to be used to reduce the principal balance of the company's $750 million term loan due in November 2018.