Hess Acreage Sold to American Energy Partners

Hess recently sold 74,000 acres of dry gas acreage to AEP for $924M. Does anyone know what areas this includes?

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Permalink Reply by RJ Morgan on February 12, 2014 at 4:58pm

A positive at least is that is just under $12,500/acre AEP is paying for dry gas acreage.

Permalink Reply by RJ Morgan on February 12, 2014 at 5:00pm
Permalink Reply by Samuel J. Orr on March 3, 2014 at 12:58am

This amounts to about $12,500 / acre. Whether this is a good or bad deal requires further information. The fundamental question is how many existing wells have been drilled on this acreage, when each well was drilled, the initial production of each well, and the decline curve for each well for those wells that were placed in production. For those wells that were shut in, one would need to know the peak production before any such wells were shut in. (I am assuming that wells shut in were tested and never placed in production. I am also assuming that no wells placed in production have been shut in after being placed in production. ) With Oil at $102 / barrel and gas at $25.30 / boe equivalent; any company with a limited drilling budget and limited available rigs should apply all of such rigs in drilling where studies reveal that Oil is available in commercially viable quantities. 5500 cubic feet of Natural Gas is one BOE (barrel of oil equivalent) and gas is currently $4.60 / 1000 cubic feet. If Hess can employ all available rigs to recover proven oil reserves, it should only drill the acreage where such oil reserves exist. This is rather elementary since the price it can obtain per BTU for Oil is almost exactly 4 times what it can obtain per BTU for natural gas. If Hess believes current market conditions for Oil and Natural Gas will continue for a number of years and that the price disparity per BTU between Natural Gas and Oil will also continue, and further if Hess holds acreage sufficient to employ all its drilling budget and equipment for an extended number of years; then its decision to sell its dry gas Utica acreage and to employ the proceeds thereof in reducing debt and /or drilling more wells in its oil patch acreage is the precisely correct decision. If such proven acreage in the "oil patch", yields some Natural Gas in addition to large amounts of Oil, the gas is but icing on the cake. In some instances the relatively cheap natural gas can be re-injected into the well creating pressure to allow the recovery of more oil. The technology is known as Gas Lift and I do not know how it works. 

Permalink Reply by Renee E. Dorsey on March 3, 2014 at 9:52pm

RJ - I called Hess in Steubenville Ohio and the guy there confirmed the area in the purchase.   I was checking on behalf of my parents in Jefferson county Ohio.    The guy was very nice.   

Permalink Reply by Jefferson on March 4, 2014 at 9:40pm

Did all of Jefferson get sold?

 

Permalink Reply by Renee E. Dorsey on March 5, 2014 at 12:16am
I really don't know if ALL but most likely. Just call them and ask; they were cool.
Permalink Reply by Linda Hilty on March 6, 2014 at 7:33pm

Hess has been trying to get those people who were in a 5 dollar an acre lease to amend the lease to a 1280 acre unit. There is a lot of language in the amendment and they said it was to make the sale of the lease more customer friendly. This is in Jefferson County

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