After gaining significant onshore assets this year through the purchase of Patina Oil & Gas and United States Exploration, Houston-based Noble Energy Inc. said last week that will sell its Gulf of Mexico shelf assets for $625 million to Coldren Resources LP, a subsidiary of Coldren Oil & Gas Co. LP, which is a First Reserve portfolio company.
In a related transaction, Harvey, LA-based Superior Energy Services Inc. acquired a 40% interest in Coldren Resources in order to give Superior the first right to provide services, rental tools and lift boats required by Coldren and to diversify the property portfolio of Superior subsidiary SPN Resources LLC.
The asset sale will include essentially all of Noble's assets in the Gulf of Mexico shelf, consisting of 725,000 gross (423,000 net) leasehold acres over 54 total fields. These properties contain 520 wells (132 operated) and 158 platforms (27 operated), all of which are expected to have meaningful production-related and decommissioning needs. Noble said it will retain its interest in the Main Pass area, which is currently undergoing repair work after suffering significant hurricane damage in 2004 and 2005. The company plans to continue active exploration and production activities in the deepwater Gulf of Mexico and onshore Gulf Coast areas. Subject to customary closing conditions, the asset sale is expected to close by June 30 with an effective date of March 1, 2006.
Production from the assets to be sold currently totals 5,000 bbl/d of oil and 90 MMcf/d of natural gas, net to Noble Energy, for a combined total of 20,000 boe/d. As of March 1, Noble Energy's proved reserves for the assets being sold totaled seven million barrels of oil and 120 Bcf of natural gas, or a combined total of 27 million boe.
"The sale of our Gulf of Mexico shelf assets is another significant step in focusing Noble Energy's future investments and growth in the most prospective areas worldwide," said Noble Energy CEO Charles Davidson. "Our merger with Patina Oil & Gas in 2005 and acquisition of United States Exploration in 2006 have brought us an immense inventory of low risk and high return projects in the Rockies and Midcontinent regions of North America. When coupled with our long-lived international assets and high-impact exploration program in the deepwater and in international, we believe Noble Energy is well-positioned to accelerate value creation for our shareholders."
After-tax cash proceeds from the sale are expected to be $525 million. The company expects to record a pretax gain from the sale of approximately $270 million, which will be more than offset by a noncash pretax charge of $390 million related to cash flow hedges that are currently included in equity as other comprehensive losses and a net tax benefit of about $5 million.
In addition to the asset sale, Noble Energy also announced that its board of directors has authorized the purchase of up to $500 million of the company's common stock. "Noble Energy may buy shares from time to time on the open market or in negotiated purchases," the company said.
With the 40% buy-in of Coldren Resources LP, Superior will have first call on all service related work, which is projected to generate at least $165 million in well intervention, rental tools and lift boat services. Superior's investment in Coldren will include 10% of the funds required to both purchase Noble Energy's shelf assets (expected to be up to $40 million) and pay for Superior's portion of insurance, hedging, fees and expenses (expected to be up to $30 million). Actual funds will be determined at closing.
Superior also has the first call to provide production-related and decommissioning services for all Coldren operated properties. The company added that SPN Resources will participate on the management committee of Coldren and will seek to efficiently schedule the timing of all work and optimize utilization of Superior's well intervention services, rental tools and lift boats employed on all Coldren operated properties. On properties which Coldren owns an interest but does not operate, Superior will solicit operators to use Superior's services. As a result of the investment, Superior expects to see incremental earnings per share of $0.07 to $0.10 in 2006 and $0.27 to $0.33 in 2007.
"Our involvement in this investment is underpinned by our core competencies in enhancing, extending and maintaining oil and gas production," said Superior Energy CEO Terry Hall. "To Superior, this opportunity significantly increases our earnings potential across all of our business segments, allowing us to optimize utilization of services, rental tools and lift boats. We believe the multiple benefits to our core business enhance this opportunity."
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