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South Korean Operator to Acquire STACK Assets, Expand Midcontinent Footprint

A subsidiary of South Korea's SK Innovation Co. Ltd. plans to expand its presence in the Midcontinent by acquiring an affiliate of a privately held exploration and production (E&P) company based in Texas.

SK E&P America Inc. (SK) said Tuesday it has a definitive agreement to acquire all of the outstanding membership interests of Longfellow Nemaha LLC, which has assets in the STACK, aka the Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties. The assets being acquired are in Garfield and Kingfisher counties.

Longfellow Nemaha is an affiliate of Addison, TX-based Longfellow Energy LP. According to Longfellow's website, Longfellow and its partners hold a 75% average working interest in the Nemaha project, an area that includes 81,000 gross (60,500 net) acres. Longfellow Nemaha owns an overall 50% stake in the project.

The Nemaha project area includes 104 producing horizontal wells, 60 drilling pads, 72 miles of 10-inch diameter saltwater disposal (SWD) pipeline and four SWD wells. Ninety-one of the horizontal wells are targeting the Mississippian Lime's Osage interval, while eight wells were drilled into the Woodford Shale and the remaining five target the Oswego Limestone.

Nemaha was initiated in 2011 and drilling began in early 2012, Longfellow said, with the drilling pads each measuring about five acres. Of the four SWD wells, three target the Arbuckle formation while one targets the Wilcox.

SK expects to complete the acquisition in the second quarter. Although financial terms of the deal were not disclosed, Reuters indicated that SK Innovation would invest up to $453 million for acquisitions and other businesses, including drilling.

"SK initially invested in the growing U.S. oil and gas upstream market in 2014, and through this platform we continue to build a balanced portfolio of conventional and unconventional assets," said President Taewon Kim. "This transaction leverages our operational expertise in the region and represents a significant step towards realizing SK's vision of being a top-tier operator in the U.S. Lower 48 and beyond."

SK acquired oil and gas assets in Oklahoma and Texas in March 2014 through SK Plymouth LLC and SK Permian LLC. Moelis & Co. served as financial adviser in the Nemaha deal, while Gibson, Dunn & Crutcher LLP and Hall Estill served as legal advisers.

SK is a chemical company that was spun off from SK Group, one of the largest conglomerates in South Korea, in 2011. SK E&S, a subsidiary of SK Group, formed a joint development agreement (JDA) with Continental Resources Inc. in 2014. The JDA is focused on natural gas targets in the northwest portion of the Cana-Woodford Shale.

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