Antero Resources is selling all of its natural gas and pipeline assets in the Piceance Basin for $325 million in cash plus assumption of its Rocky Mountain firm transportation obligations in order to focus more on the Marcellus and Utica shales.
The assets consist of 61,000 net acres of leasehold and 30 miles of gathering pipeline in the Piceance Basin in western Colorado. The assets contain an estimated 205 Bcfe of proved developed reserves as of Sept. 30 and are currently producing 59 MMcfe/d net from 284 gross operated wells. The buyer is a private company whose name was not disclosed; the deal is expected to close next month, subject to conditions, with an effective date of Oct. 1, 2012.
"The Piceance asset sale allows Antero to redeploy capital and human resources to its Marcellus and Utica Shale projects where we are focused on the development of liquids-rich natural gas and oil reserves," said Antero CEO Paul Rady. "With the closing of the Piceance transaction, and our Arkoma Basin exit earlier in 2012, Antero will complete its transformation into a pure-play Appalachian Basin shale producer with a large scale, low cost, liquids-rich drilling inventory."
A $445 million deal in June marked Antero's exit from the Arkoma Basin (see Shale Daily, June 5). In May Antero said it planned to expand its operations in the Marcellus Shale (see Shale Daily, May 16).
Pro forma for the closing of the Piceance transaction, Antero's estimated 1 Tcfe of total net proved developed reserves would be reduced to approximately 800 Bcfe. Additionally, Antero's $1.4 billion of net debt would be reduced to $955 million, pro forma for the closing of the transaction and assuming the full monetization of the Piceance hedges. Upon closing, Antero expects the borrowing base under its credit facility to be reduced to $1.35 billion from $1.65 billion.
The sale does not include Antero's 78 Bcf of CIG index (Rockies) natural gas hedges through 2016, which have a cash value of about $100 million.
Firm transportation obligations through 2021 were included in the deal. These have an undiscounted liability of $91 million, based on the difference between the pricing upgrade that can be obtained in the futures market at the tailgate of the pipelines and the fixed-fee pipeline tariffs.
Assuming the current monetization of Rockies natural gas hedges by Denver-based Antero, the total Piceance proceeds will include $325 million in cash from the purchaser for the upstream and pipeline assets before customary post-closing adjustments, the assumption by the purchaser of $91 million in undiscounted future firm transportation obligations and approximately $100 million in cash for the monetization of Antero's Rockies hedges. The transaction and hedge proceeds will initially be used to repay bank debt;no taxes are expected to be paid, Antero said.