XTO, American Energy Utica in deal for 30K acres of Utica acreage

http://www.reuters.com/article/2014/02/03/us-americanenergy-utica-i...

http://ca.finance.yahoo.com/news/american-energy-utica-llc-agrees-1...

CEO Aubrey McClendon's American Energy Partners said on Monday that it had struck three deals in Ohio's Utica shale region, doubling its holdings there.

The company said it would buy about 130,000 acres in the southern part of the Utica shale from Hess Corp (HES.N), Exxon Mobil Corp (XOM.N) and privately held Paloma Partners. It said the three deals would bring its total acreage in the region to about 260,000 acres.

American Energy did not disclose how much it is paying for the acreage, but Hess said previously that it sold its 74,000 acres in the Utica for $924 million.

McClendon co-founded Chesapeake, the No. 2 U.S. natural gas producer, in 1989.

But he left his post of chief executive officer in April after clashes with the board over spending and a series of Reuters investigations that led to civil and criminal probes at the company.

An internal investigation by Chesapeake's board last year cleared McClendon of intentional wrongdoing.

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Permalink Reply by martin on February 3, 2014 at 6:10am
Wow. There goes all the competition . I wonder how long it will take to drill and develope infrastructure for 260,000 acres. The guy has big nuts no doubt about it.
Permalink Reply by TM on February 3, 2014 at 6:41am

AEU plans to drill approximately 2,700 gross wells and 1,600 net wells over the next decade on their acreage position. He must be going to bring a bunch of rigs into Ohio to get to these numbers.

Permalink Reply by martin on February 3, 2014 at 7:10am
Can you explain the difference between gross and net wells please.
Permalink Reply by TM on February 3, 2014 at 7:53am

"Gross" natural gas and oil wells or “gross” acres equal the total number of wells or acres in which the Company has a working interest.

Net" gas and oil wells or "net" acres are determined by summing the fractional ownership working interests the Company has in gross wells or acres.

Permalink Reply by Tim Tarr on February 3, 2014 at 10:24am

1200 acre units

2 wells per unit

434 wells will HBP 260,000

say $9MM per well that's ~$4B

So $4B to tie up about $40B+ in value.

conservative numbers used.

That $40B based on $3.50/Mcf with a net of $1.75 a GIP of 200 Bcf sq mile and paying 20% royalty. Get in the $5/Mcf and you get close to $100B value. That's some nice leverage.

They can HBP and produce just enough gas to pay the bills after first year. A good well pays for itself in 1 year or less.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on February 4, 2014 at 5:24am

"A good well pays for itself in 1 year or less."

Antero has payback in dry gas at 3.6 years.  Less than a year for condensate/rich gas areas.

Permalink Reply by Harry E. Rose on February 4, 2014 at 3:15am
Tim, If my math is correct, the numbers you used would equate to mineral value of $30,000/acre. Is that correct? Thanks.
Permalink Reply by Harry E. Rose on February 4, 2014 at 3:23am
Tim, I meant to say $30,000/acre + for landowner at 20% royalty.
Permalink Reply by Tim Tarr on February 4, 2014 at 4:11am
Yes, ~$35,000
Keep in mind that's over a long time. At least 50 years probably 100 years.
As nat. gas replaces more of the oil and coal btu's nat. Gas will be higher.

It's at $5.00 again this morning.
0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on February 4, 2014 at 5:21am

"Yes, ~$35,000
Keep in mind that's over a long time. At least 50 years probably 100 years."

How did you arrive at the 50 or 100 year assessment?

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on February 4, 2014 at 5:22am

"Nice thing about these wells is they can produce about 50% of total in first 3-5 years."

It's closer to 80%.

Permalink Reply by Tim Tarr on February 4, 2014 at 7:34am

Going to take that long to "drain" the last well drilled. Right now it's the drill and HBP stage. 

The full development mode will move at a more sustainable rate. After all the leases are HBP it's time for them to make the real money. Recover cost of wells and pads and than reduce production. Why drill and sell at $3.50 or even $5.00 when you can slow down, reduce costs and get $7.00. Notice how drilling has slowed in NE PA or even Haynesville and Fayetteville Shales. That extra $3.50 goes straight to their (and Landowners) bottom line.

20 years ago the EUR were near 0% now in the 30% range. In another 20 years might get in the 50% range.

Than there is the infrastructure build. They don't acquire pipeline ROW's, install pipelines and build processing plants for 15 years of use.

I was going to say 50% of total in 12-18 months (per well) but wanted to be very conservative. The ones' who will be mad is those that sell their rights. When it's all said and done that $35,000/acre will be low. But so will I, about 6' lower.

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