Statoil, Talisman buy Eagle Ford Shale in $1.3B JV deal

Sources: Statoil, Talisman

In a 50/50 joint venture, Norwegian producer Statoil (NYSE: STO) and Canadian oil and gas company Talisman Energy (NYSE:TLM) (TSX:TLM) have jointly acquired the Eagle Ford Shale assets of Enduring Resources. The South Texas acquisition comprises 97,000 acres in a $1.325 billion transaction, which equates to about $10,900 per acre. 

Furthermore, Statoil will acquire 50% of Talisman's existing Eagle Ford acreage and production for $180 million (18,500 acres net to Statoil). As a result, Statoil and Talisman will together hold 134,000 net Eagle Ford acres and associated assets and production in the joint venture. 

In addition, the companies have an option to jointly acquire up to 22,000 net acres. 

The Assets 

The acquisition includes 97,000 net acres of land (50/50 joint-venture between Talisman and Statoil) in the liquids rich window of the Eagle Ford shale. The purchase price equates to about US$10,900 per acre, taking into consideration Enduring's existing production of 5,500 boe/d, as well as gas processing infrastructure that comes with the acquisition.

Approximately 55,000 net acres are held by existing production. There are currently three horizontal rigs operating on the leases, which is more than sufficient to hold this land. The land position consists of large contiguous blocks across the Eagle Ford, with a thick, high-porosity shale section, and high expected ultimate recovery factors (EURs). EURs are expected to average at least 660,000 boe per well.

There is currently 5,500 boe/d of production, including six Eagle Ford wells which are on-stream. An additional eight wells have been drilled; three wells are drilling, with nine additional wells planned by year-end. Initial production rates on the two most recent wells have averaged 3,700 boe/d (including 1,000 bbl/d of liquids) and 2,300 boe/d (including 425 bbl/d of liquids). There are numerous egress options available to support future production growth.

Talisman believes there is an estimated 800 million boe of net contingent resource on the acquired properties, of which approximately 50% is expected to be condensate or natural gas liquids. Talisman estimates there are over 1,000 net drilling locations on the newly acquired acreage. The company believes that similar to its Marcellus and Montney shale plays, its Eagle Ford play will have a full-cycle break even of less than US$4 per mcf. 

The Joint Venture

Initially, Talisman will take the lead as operator for the total acreage with Statoil taking over the operatorship of 50% of the acreage within three years. Governance in the joint venture will be shared equally between the two partners from the start. 

Enduring operates 90% of its leases, and this acreage is located in an attractive, liquids rich area of the Eagle Ford play. Statoil expects that a significant proportion of the revenue from Statoil's Eagle Ford acreage will come from gas liquids and condensate which are competitively located to be sold into the petrochemical and refinery centers in Texas. 

The effective date of the transaction is August 1, 2010. The transaction is expected to close by the end of this year.

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