Gulfport has entered into a definitive agreement to purchase approximately 30,000 net acres in the Utica

Gulfport Energy Corporation (GPOR) today announced its proposed acquisition of additional working interests in the Utica Shale and provided an operational update.

Utica Shale

Gulfport has entered into a definitive agreement to purchase approximately 30,000 net acres in the Utica Shale in Eastern Ohio from Windsor Ohio LLC, an affiliate of Wexford Capital LP, for approximately $300 million, increasing Gulfport's leasehold interests in the Utica Shale to approximately 137,000 gross (99,000 net) acres. The transaction excludes 14 existing wells, along with certain acreage surrounding each well. The proposed transaction, which is expected to close prior to year-end, will increase Gulfport's working interest in the acreage to 72.5%. Gulfport will continue to serve as operator of its acreage in the Utica Shale. The transaction was approved by a special committee of Gulfport's Board of Directors. Tudor Pickering Holt & Co acted as advisor to the special

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That is $10,000. / acre. Of course because there are existing wells included, one might assume the drilling costs / well to be $6,000,000. Valuing each well at $6 million and multiplying by 14 gives a figure of $84,000,000. Subtracting $84,000,000 from $300,000,000 leaves $216,000,000. Some simple math then says that Gulfport paid $7200 / acre for the leaseholds exclusive of what they paid for the existing wells and some acreage surrounding these wells. Does anyone else have a better analysis?  I think we have to somehow attempt to break these transactions down so that we may have some idea what leasehold interests in our own acreage may be worth with appropriate adjustments for differing geography and geology. I include geography in a broad sense to include differences in available infrastructure (pipeline proximity etc.) which might increase or decrease leasehold value per acre? I am sure that my analysis is likely faulty but it may at least start a conversation for those a lot more knowledgeable than I am. 

Samuel

I think i know where some of these wells are and they are clinton wells NOT utica wells. My guess Gulfport wanted the leased land

Hello All That reminds  me of the deal done a while back where Chesapeake  sold a25% stake in 619,000 acres or the equal to owning 155,000 acres  for a total of $15,000 per acre to Total of France ,this price was 700 million immediately and additional money later to fund about 60% of the drilling cost over up to a 7 year period .

Still $15,000 is cheaper than a lot f acres paid in texas in 2008 when some of the leases went from $17,000 -$35,000 with royalties up to 27% 

I personally have a copy of a lease done in tha Barnett Shale in Tarant County Texas with  XTO that was done in 2008 for a $20,000 per acre price with a 25% royalty for a 3 year lease term , this was with a proportionate share of the taxes paid by the landowner, which would still be a great lease .

As far as I have read the Barnett is not nearly as good as the EagleFord Shale and the Eagle Ford has been compared to our Utica . The good thing in Ohio we have several shale layers from top to bottom and the Texas area is only developing one shale area like the Barnett in the north area and the EagleFord in the SOuthern parts of Texas .

This was when the oil price was up to about $150 a barrel , but as this progresses and the liquified natural gas becomes in higher demand and used in our vehicles as well as being required to be used in commercial vehicles in a few years as well as being shipped out of the country and all the other uses for natural gas such as in making fertiler,paints and many other products as well as various fuel usages the per acre value will continue to climb as the demand progresses.

This will be a great boost in all area oil,wet and dry gas regardless of what we first heard

good luck to all ,.

 The transaction excludes 14 existing wells, along with certain acreage surrounding each well. Sam i cut n copied this from statement above. i believe u r right on @ the 10,000 mark but as for the existing wells the previous company either kept those wells, or sold them altogether differently

Does someone have a map of where this acreage is located? Failing that, it would be nice to have a verbal description of the location of this property. Since all parts of the Utica Shale Play are not created equal, the evaluation of the transaction and its affect on landowner leases would have more validity if we knew the location of the GPOR purchase.

BluFlame

   Wexford Capital LP is a Connecticut-based hedge fund and Windsor Ohio LLC is strictly an internal holding company. Wexford has little info available on their website to the public. Interesting that Wexford's name has never before appeared as a player in the Utica Shale. 

   Likely, there is more to this story. Currently, it's not passing the "smell test" (IMHO).

BluFlame

It appears that The companies are affiliates of Gulfport and they owned the acreage together. Gulfport did not acquire "new" acreage, rather they acquired a larger interest in the acreage they already owned. Gulfport has increased their interest in the 137,000 acres from 50% ownership to 72.5% ownership. 22.5% of 137,000 gives you roughly the 30,000 acre increase they discuss. As far as the wells excluded, I'd imagine its the wells that Gulfport has already drilled...

Joe;

     Where do you get the cost to drill well as $9,000,000?? The figures thqt I have seen in different places are in the range of 5.5 million to 6 million dollars!

How can you tie drilling costs to per/acre costs?

I couldn't open the file, sorry (has to be a .doc file I guess).

But as widely variable as acreage costs are (from a few hundred dollars to 10 thousand dollars and the number of acres from five to five thousand or more) how can that even be comparable?

For example, if I have 10 acres and I lease it for $10,000 (unknowingly) and someone else leases 10 acres for $100,000, wouldn't that distort the numbers?

Joe,

   I know you used this NPV calculation as an example, but it would be interesting to run the numbers using GPOR's actual results to date. Also suggest you need a NGL component, as that is an important revenue generator. 

   I've attached GPOR's December Investor update. They calculated average results for their 1st seven producing wells on Page 13. I guess if you really wanted valid numbers, you'd need to factor in a decline rate. That seems to be an unknown so far.

  Probably all an exercise in futility until more is known about the Utica.

BluFlame

Attachments:

Jonathan,

   If you read the announcement, it would lead you to the conclusion this is new acreage. I see the statement later on in the announcement noting GPOR's increase in ownership. At best, the announcement is poorly worded and misleading.

   So does this mean that Wexford retains a stake in the 14 wells? Also, does Wexford own the remaining 27.5%? There is some logic to Wexford partially "cashing in" on their investment, likely at a tidy profit.

    Any transaction involving a hedge fund raises a red flag with me. And Wexford seems a little obsessed with secrecy.

BluFlame

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