Shell Exploration and Production Co., which was said to have made earnest attempts to purchase a big stake in the Barnett Shale of Texas, will instead sell its claim, about 50,000 net acres, a spokesperson told the Fort Worth Star-Telegram Thursday. The properties, which are being sold so that Shell can focus on other exploration priorities, are expected to fetch around $200 million.
Spokesperson Kelly op de Weegh said the Houston-based producer has to date drilled about 30 horizontal wells with some success, "but we have not acquired a critical mass of acreage to meet our own performance requirements." Shell has begun showing the properties to interested parties, but it does not yet have a buyer.
According to Texas Railroad Commission statistics, Shell produced about 800 MMcf from the Barnett in 2006. It also had 54 wells permitted. Op de Weegh told the Star-Telegram that by the time Shell sells the properties, it expects them to be producing 10-15 MMcf/d. Shell also wants to hold an as-yet undetermined partial interest in the production. The company has identified about 200 additional drilling sites.
With little fanfare, Shell entered the Barnett in September 2005, initially in a deal to explore about 25,000 acres in Parker County, which is in the core of the play (see NGI, Jan. 23, 2006). Shell teamed with Rio Vista, TX-based Sundance Resources Inc., a privately held explorer, which in turn had struck a deal with legendary oil man T. Boone Pickens to explore about 75,000 acres in Erath and Parker counties.
"It's no secret they made a big run at Chief Oil & Gas," in 2006, said Zane Meekins of Cawley Gillespie & Associates, a commercial real estate company. He told the newspaper, "If they'd made the Chief acquisition, they'd probably have stuck around. But now Devon and XTO and Chesapeake control the play." Devon Energy Corp. bought Chief last year (see NGI, May 8, 2006).
Chesapeake Energy Corp., which has expressed an interest in expanding its holdings the Barnett, had no comment on the Shell deal. Devon and XTO officials also did not return calls for comment.
However, Chesapeake, which holds about 200,000 net acres in the Barnett, was said to be close to a deal to buy Four Sevens Oil Co. Ltd., another big Barnett player, according to last Monday's Fort Worth Business Press. Last year Chesapeake picked up 39,000 net acres of Barnett Shale leasehold in Johnson and Tarrant counties, TX, along with 30 MMcfe/d of current production and $55 million worth of midstream assets in an $845 million cash deal with Four Sevens and its partner Sinclair Oil Corp. Chesapeake also spent $87 million to buy 28,000 net acres of leasehold in the same area from other sellers (see NGI, June 12, 2006).
XTO Energy made its initial foray into the Barnett in a deal with Four Sevens (see NGI, March 1, 2004). And in March, Fort Worth-based Texas Christian University (TCU) signed a letter of intent giving Four Sevens sole negotiating rights to drill for gas on the 260-acre university property. TCU began looking into opportunities for gas exploration in February after several energy companies approached TCU with leases.
Neither Chesapeake nor Four Sevens commented on the rumors.
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