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New Player Muscles Into Powder River, Buying CBM Wells, Gas Plant

Moriah Group LLC, based in Midland, TX, is becoming one of the biggest operators in Powder River Basin (PRB) after securing a bundle of coalbed methane (CBM) gas wells from WPX Energy Inc. and Anadarko Petroleum Corp., as well as a big natural gas gathering system.

Over the past couple of months, Moriah and its partners have agreed to acquire WPX's entire PRB portfolio, including its stakes in Fort Union Gas Gathering LLC, with system capacity of 1.2 Bcf/d. Fort Union is being sold to affiliate Moriah Powder River LLC for $80 million, according to WPX.

Carbon Creek Energy LLC, formed by Moriah and with private equity funding, separately is buying an estimated 7,500 gas wells in the PRB through dual transactions with WPX and Anadarko. About 2,000 wells are being purchased from WPX with 5,500 from Anadarko. About 4,500 of the wells today produce an estimated 400 MMcf/d of natural. Another 800 wells are expected to ramp up by the end of the year.

WPX had an agreement last year to sell its CBM wells to an undisclosed buyer for $155 million (see Shale DailyAug. 20, 2014).However, that sale is said to have fallen through.

Sheridan-based Wood Group PSN is to manage the development for Carbon Creek. The dual purchase would allow Carbon Creek to streamline operations because the WPX and Anadarko wells are near each other, with field employees often sharing the same roads.

Tom Fitzsimmons, a member of the Wyoming Oil and Gas Conservation Commission, is president and part owner of Carbon Creek. He plans to recuse himself from decisions before the commission when he could be perceived to have a conflict of interest.

The Fort Union system being sold by WPX is in Converse and Campbell counties. It consists of three parallel 24-inch diameter pipelines that traverse 106 miles. The gathering lines deliver into three interstate pipeline systems: Wyoming Interstate, Colorado Interstate and Tallgrass Energy. The system also has the ability to remove carbon dioxide through a centralized Amine Treating Facility. Including WPX, Fort Union has four capacity owners: Kinder Morgan Inc.'s Copano Energy, Western Gas Partners LP and Crestone Energy Ventures.

The CBM sale would release WPX from firm transportation with $30 million in future demand obligations. In 2013 the PRB portfolio represented about 15% of WPX's total output, but it generated only 5% of adjusted earnings, minus the unused transportation.

WPX has about 55 employees now working in the PRB, while Anadarko has close to 300. Unclear is how big Carbon Creek's workforce would be; some job losses are expected, but some employees from both companies are expected to be transferred to other units. The deal should provide Carbon Creek with an experienced workforce and would provide data from two of the biggest Rockies producers.

Up to 100 of Anadarko's employees are to remain in the region to work on other properties. Anadarko said it plans to retain gas gathering assets in the PRB not related to CBM, along with four plants and some upstream oil and gas production. It has exploration development ongoing across more than 350,000 net acres in the PRB's deep formation. The company drilled 10 horizontal wells in the PRB during 2014 as part of a multi-objective horizontal exploration program targeting oil. It controls about 350,000 acres of deep mineral rights and 640,000 acres of shallow rights within the PRB.

WPX is planning to sell $400-500 million of its onshore assets by the end of this year, with another $400-500 million targeted in 2016. Last Monday it sold its North Dakota gathering system in the Van Hook peninsula area for $185 million (see Shale DailyAug. 31).

The sale of the PRB operations "further sharpens WPX's portfolio and supports the company's delevering plan," following its recent $2.75 billion acquisition of Permian Basin assets from RKI Exploration and Production LLC (see Shale DailyJuly 14). The RKI deal increased WPX's liquids reserves by one-third. Combined, the two asset sales this week place WPX more than half of the way toward its 2015 goal.

"We will remain diligent in our debt reduction efforts," said CEO Rick Muncrief.

Moriah Group, a diversified holding company, has a portfolio of oil/gas, real estate, technology and construction enterprises. Its oil/gas entities include Petroleum Strategies Inc., which has executed more than $14 billion in transactions, as well as Legacy Reserves, Moriah Energy Services LLC and Blue Quail Energy Services LLC. Moriah also has an interest in Loadcraft Industries, a rig manufacturer in Brady, TX.

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