Carrizo Oil & Gas Inc. is selling its remaining Barnett Shale properties as well as other noncore assets in East Texas and the Marcellus Shale. The move is another step in the company's pursuit of oilier activities in the Eagle Ford Shale and elsewhere.
The company is letting go of "substantially all" of its remaining Barnett Shale assets as well as all of its interest in the Camp Hill Field in East Texas and certain undeveloped acreage in the Marcellus Shale, for $268 million. Proceeds will repay credit facility debt and fund a portion of this year's capital program, mainly in the Eagle Ford Shale, Carrizo said.
"This is a bittersweet day for Carrizo as the Barnett Shale started the company's transformation into an unconventional resource player back in 2003," said CEO Chip Johnson. "While we've had a great run in the play and worked with some great partners, we believe the sale of these assets is a natural step in our continued shift toward premier oil and liquids-rich plays.
"This puts us in a strong position to continue our Eagle Ford Shale and Niobrara developments, as well as ramp up our Utica Shale activity in 2014."
Wells Fargo Securities analyst David Tameron said the sales set Carrizo up as "an Eagle Ford and Niobrara pure play with a Utica Kicker." Earlier this year, Carrizo said it was stepping up activity in the Eagle Ford and Niobrara (see Shale Daily, June 18).
The Barnett divestiture includes 9,000 net acres primarily in southeast Tarrant County with year-end 2012 proved reserves of 303.5 Bcf. Current net production from the assets is 44 MMcf/d. Closing of the transaction is expected by late October, with an effective date of July 1, 2013.
The Camp Hill divestiture includes year-end 2012 proved reserves of 1 million bbl and current net production of about 160 b/d of oil. It also has an effective date of July 1, 2013 and is expected to close soon. The Marcellus Shale divestiture primarily includes 2,850 net undeveloped acres in noncore areas of the play and is expected to close in the fourth quarter.
Tameron said Carrizo management can refocus investors on its asset base, particularly in the Eagle Ford, with noncore sales in motion and the balance sheet cleaned up. He said there is a "disconnect" between how the company values its Eagle Ford holdings and Wall Street values the acreage.
This isn't the first time the Barnett has been thrown over by an independent with its eyes on more lucrative oil plays. One year ago, Pioneer Natural Resources Co. got out of the Barnett to focus on oily plays in Texas (see Shale Daily, Sept. 7, 2012).
Total natural gas production in the Barnett in June was 143.1 Bcf, a 19% decline compared with 177.2 Bcf in June 2012, according to Railroad Commission of Texas data. Gas production was also lower than it had been in the Barnett in May (153.7 Bcf) and was lower than the Barnett averaged over the previous 12 months (165.8 Bcf) (see Shale Daily, Aug. 22).
Earlier this year researchers at the University of Texas at Austin said Barnett gas production potential is "slowly declining;" however, total resource recovery from the granddaddy of shale plays is expected to be three times what has been produced to date (see Shale Daily, March 1).