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ExxonMobil Grabs More Permian Acreage, Sells Gassy Utica Property

ExxonMobil Corp.'s onshore U.S. subsidiary on Monday agreed to buy oily land in the Permian Basin of Texas and sell natural gas-weighted Utica Shale property in Ohio.

The separate agreements, managed by U.S. onshore subsidiary XTO Energy Inc., would enhance the domestic oil and natural gas portfolio, management said.

"These transactions underscore our commitment to developing high-margin liquids growth in areas such as the Permian, while also efficiently funding development of our extensive domestic natural gas resource in emerging plays such as the Utica," XTO President Randy Cleveland said.

In an agreement with Endeavor Energy Resources LP, XTO would fund development to gain a "substantial" operating equity in about 34,000 gross acres that are within the Permian's Wolfcamp formation in Midland and Upton counties. Endeavor would operate the shallow production while XTO would drill and operate the horizontal wells in the deeper intervals.

The agreement would increase XTO's holdings in the Permian to just more than 1.5 million net acres.

"The Wolfcamp Shale is a vast, tight oil resource with tremendous potential," Cleveland said. "The presence of multiple, stacked pay zones creates the potential for capital-efficient horizontal development, and the proximity to XTO's ongoing Wolfcamp operations will offer operating cost efficiencies."

ExxonMobil at the end of 2013 controlled around 1.5 million net acres in the Permian Basin. It also last year began ramping up activities in the West Texas region to develop conventional and unconventional reservoirs, investor relations chief David Rosenthal said in October (see Shale Daily, Oct. 31, 2013).

At that time the producer was running eight operated rigs and had turned almost 10 wells to sales across the entire basin. Net production at the end of the third quarter was more than 90,000 b/d. More than 65 workover rigs also were active on the Permian properties to increase production by opening additional zones and performing fracture stimulation treatments.

ExxonMobil also has been expanding infrastructure for carbon dioxide projects in the Central Basin of the Permian to enhance some oil recovery projects. Rosenthal said last year the focus for the project was "highlighted by the Wolfcamp, Wolfbone, Wolfberry and Bone Spring reservoirs."

In a competitive bidding process, XTO also agreed to sell to Aubrey McClendon's privately held American Energy-Utica LLC (AEU) about 30,000 net acres in Ohio's Harrison, Jefferson and Belmont counties. ExxonMobil isn't selling the acreage outright, but the AEU unit would help fund near-term development for an undisclosed amount of money. Late last month an affiliate of McClendon's American Energy Partners LP acquired up to $500 million in private equity commitments to pursue working stakes in "various onshore basins" (see Shale Daily, Jan. 29).

XTO would continue to operate in a core area of about 55,000 net acres, optimizing development by using transaction proceeds to fund all of the near-term development costs.

On Monday American Energy Partners LP, founded by Aubrey McClendon, confirmed that it was the mystery buyer of 74,000 acres in the Utica from Hess Corp. (see Shale Daily, Jan. 30).

"We just initiated development in the Utica and are encouraged by results from our initial well that is producing at a peak 30-day rate of about 15 MMcf/d of dry gas," Cleveland said. "The agreement funds near-term development of a substantial operating position in this emerging play."

In 2013 XTO grew its Appalachian Basin production by almost 30%. It also maintains around 645,000 acres in the combined Marcellus and Utica shales. However, ExxonMobil turned to more liquids last year and was running no gas-directed rigs in the final three months of 2013.

ExxonMobil's U.S. portfolio has tripled in size since it paid $41 billion for XTO  in 2009 (see Daily GPI, Dec. 15, 2009). XTO now manages the portfolio. At the time, the XTO transaction added about 45 Tcfe to ExxonMobil's reserves base, making it the largest onshore natural gas operator.

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