Wednesday, July 3, 2013

EXCO Acquires Some Chesapeake Assets in Haynesville (and Eagle Ford) (and Partners with KKR in Eagle Ford)

EXCO Resources announced this morning that it has acquired approximately 9,600 net acres in the Haynesville Shale for around $320 million.  Sounds like a high price, but it is mostly actively operating proven acreage.  Quoting from the press release, the Haynesville portion of the acquisition includes the following:
  • Average net production of approximately 114 million cubic feet of natural gas equivalent per day in May
  • Non-operating interests in 170 EXCO operated wells in EXCO core area
    • Approximately 5,600 net acres
  • Operating interests in 11 operated wells directly offset to EXCO core area
    • Approximately 4,000 net acres
    • Adds approximately 55 identified drilling locations

The play for EXCO is to expand upon the company's existing acreage and consolidate ownership of its existing production.  The effective date for the Haynesville portion of the acquisition is backdated to January 1, 2013.  The company will have a conference call on Monday to provide more specifics.

In the Eagle Ford, EXCO is paying $680 million for around 55,000 acres, mostly for future drilling opportunities.  Since EXCO has no real presence in the Eagle Ford, this is really its buy-in to the play. But more interesting is a nugget buried in the press release: 
"EXCO and KKR have entered into a non-binding Memorandum of Understanding whereby KKR will fund approximately $133 million, which represents 50% of certain undeveloped acreage included in the Eagle Ford acquisition, and become the drilling capital partner in the Eagle Ford acreage."
So now KKR and EXCO are partners on all of EXCO's Eagle Ford acreage?  Maybe I've been busy with other things, but this is the first I'm hearing of this.  If so, why bury the news?  EXCO and similarly positioned gas-centric producers have been struggling with pervasively low natural gas prices, and the company's existing strategy seems to partner with another entity with deeper pockets (BG Group in both Haynesville and Marcellus) to exploit a play, but it feels like they are hiding this newsbit for some reason.  Maybe because it's an MOU and not a formal JV?  I dunno.  I guess we find out Monday.

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