Calgary-based Talisman Energy Inc. and Norway's Statoil ASA have formed a joint venture (JV) to acquire 97,000 net acres of liquids-rich Eagle Ford Shale properties from Enduring Resources for US$1.325 billion, the companies said.
"Talisman now has material positions in three world-class shale plays in North America," said Talisman CEO John A. Manzoni. "This acquisition is in the liquids-rich window of the Eagle Ford and complements our existing acreage." Talisman has established large positions in the Marcellus Shale in Pennsylvania, the Montney Shale in British Columbia and Utica Shale in Quebec.
Talisman and Statoil plan to create a 50/50 JV across the Eagle Ford Shale play with Talisman as the initial operator. The net cost to Talisman of new acreage will be about US$485 million after Statoil purchases a 50% working interest in Talisman's existing 37,000 net acres in the Eagle Ford. Talisman will hold about 70,000 net acres, predominantly in the liquids-rich area of the play.
Statoil is expected to operate approximately 50% of the assets within three years. The deal is expected to close by year-end. Statoil already has a substantial interest in U.S. shale gas, having moved into the Marcellus early with a $3.38 billion deal in late 2008 with Chesapeake Energy that gives it essentially 32.5% of everything Chesapeake has in the Marcellus.
The purchase price equates to about US$10,900/acre, taking into consideration Enduring's existing production of 5,500 boe/d, as well as gas processing infrastructure that comes with the acquisition. The JV partners have an option to acquire up to an additional 22,000 net acres.
Approximately 55,000 net acres are held by existing production. There are currently three horizontal rigs operating on the leases, which is more than sufficient to hold the land, the companies said. The land position consists of large contiguous blocks across the Eagle Ford, with a thick, high-porosity shale section, and high expected ultimate recovery factors (EUR). EURs are expected to average at least 660,000 boe per well.
There is currently 5,500 boe/d of production, including six Eagle Ford wells that are on-stream. An additional eight wells have been drilled; three wells are drilling, with nine additional wells planned by year-end. Initial production rates on the two most recent wells have averaged 3,700 boe/d (including 1,000 b/d of liquids) and 2,300 boe/d (including 425 b/d of liquids).
Earlier this year Statoil agreed to acquire additional acreage in the Marcellus Shale from Chesapeake Energy Corp. (see Daily GPI, March 29) following a nearly $3.38 billion deal with Chesapeake in the Marcellus almost two years ago (see Daily GPI, Nov. 12, 2008). On Sunday Chesapeake announced another shale transaction, this one in the Eagle Ford Shale in South Texas where it struck a deal with CNOOC Ltd. (China National Offshore Oil Corp.) worth more than US$2 billion (see related story).
Talisman said it believes there is an estimated 800 million boe of net contingent resource on the acquired properties, of which about 50% is expected to be condensate or natural gas liquids. Talisman estimates there are more than 1,000 net drilling locations on the acreage. The company believes that similar to its Marcellus and Montney shale plays, its Eagle Ford play will have a full-cycle break-even of less than US$4/Mcf.
Talisman has established large positions in the Marcellus Shale in Pennsylvania, the Montney Shale in British Columbia and Utica Shale in Quebec. It now has "a material core position in the liquids-rich window of the Eagle Ford." Talisman's shale play acreage gives it the "critical mass" needed to support its goal of becoming a leading North American shale producer.
Barclays Capital acted as an adviser to Talisman.