Devon Energy Corp. tightened its grip on the Barnett Shale on Thursday, completing its $2.2 billion acquisition of privately held Chief Holdings LLC (see Daily GPI, May 3). Devon will now be producing almost half of the overall production from the Barnett, considered the largest natural gas field in Texas.
On a net basis, the combined companies currently produce about 645 MMcfe/d from more than 2,500 Barnett wells. Including the Chief assets, Devon expects its Barnett holdings to ultimately produce more than 8 Tcfe.
"This transaction affirms our continued commitment as a leader in the Barnett Shale's development," said CEO J. Larry Nichols. "The company is continuing to pursue new innovations and advanced applications of technology to further enhance our ability to draw from the enormous volumes of gas in place within the Barnett Shale trend."
The transaction adds 617 Bcfe of proved reserves to Devon's production and increases its lease holdings in the Barnett by 169,000 net acres. Devon now plans to accelerate its drilling in the play by adding six rigs to its 20-rig fleet, and by the end of this year, it expects to have 30 rigs operating on its 721,000 net acres of Barnett holdings. The Oklahoma City-based super independent has set aside $900 million to explore and develop its combined Barnett properties this year.
All of Chief's holdings are in some of the most prolific areas of the Barnett play, in the North Texas counties of Wise, Denton, Tarrant, Parker, Johnson and Hood. Wise, Denton and Tarrant counties were among the top 10 gas-producing counties in April, according to the Texas Railroad Commission's April preliminary report.
Also Thursday, Crosstex Energy LP completed its $480 million purchase of Chief's gas gathering pipeline systems and related facilities. Eagle Mountain Pipeline is located in Saginaw, TX, and it currently treats about 100 MMcf/d for sale to local and regional markets.
"The assets we acquired from Chief, paired with our North Texas Pipeline, enable Crosstex to deliver a continuing supply of natural gas to expanding markets, strengthen our important alliance with Devon Energy, and further bolster our strategies for organic growth and consolidation in the play," said CEO Barry E. Davis.
Through the acquisition, Crosstex acquired 250 miles of existing pipeline with up to an additional 400 miles of planned pipelines located in Parker, Tarrant, Denton, Palo Pinto, Erath, Hood, Somervell, Hill and Johnson counties in Texas. The assets also include a 125 MMcf/d carbon dioxide treating plant and compression facilities with 26,000 horsepower. Approximately 160,000 net acres owned by Chief, now operating under Devon, and 60,000 net acres owned by other producers will be dedicated to the systems.
And take note. Although all of Chief's properties were sold, founder Trevor Rees-Jones kept the Chief Oil & Gas name, and already the entrepreneur is making tracks in the energy business again. In mid-June, Rees-Jones was one of the deal makers who bought Sempra Energy Production Co. (see Daily GPI, June 13). PEC Minerals LP picked up the Sempra subsidiary for $225 million in cash. PEC is owned by a group consisting of Rees-Jones and private Texas producers Jetta Operating Co and Providence Energy Corp. The buy gave the PEC group ownership of mineral rights on more than 570,000 net acres and executive rights to more than 190,000 net acres in 31 states, along with holding interests in third-party natural gas and oil wells and ownership in 6,000 surface acres in five states.
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