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Southwestern Gobbles Up 312,000 Niobrara Acres in Colorado

A unit of Houston-based Southwestern Energy Production Co. said Wednesday that it has signed an agreement to buy about 312,000 acres in northwest Colorado's Niobrara Shale formation from Quicksilver Resources Inc. and Royal Dutch Shell's SWEPI LP (Shell Western E&P). The price was $180 million, subject to closing conditions, the companies said.

Southwestern Energy Co. (SWN) said the deal is expected to close in the second quarter, and it will use its revolving credit facility to finance the acquisition of a good portion of the Sand Wash Basin, stretching 50 miles across and 20 miles wide. In a separate announcement, Quicksilver said the deal will close May 1, effective back to Jan. 1 of this year.

SWN said it expects to produce a combination of crude oil, natural gas liquids (NGL) and natural gas from the Niobrara in Colorado. Southwestern has been a player in other shales, such as the Marcellus, where it is expecting to extract up to 250 Bcf of gas this year (see Shale Daily, Dec. 11, 2013).

SWN CEO Steve Mueller called the transaction a "liquids-rich resource play" for the company's entry into the Niobrara, noting that the acreage provides "the opportunity for us to leverage our operational strengths into a new, large, scalable project."

Among the area’s characteristics, Mueller said, are proven oil production with minimal water cut, and "preferred fluid-phase windows, demonstrated overpressure with evidence of matrix permeability and porosity.” He thinks there is potential upside from downspacing and stacked reservoir benches.

Mueller said SWN expects to start drilling operations in early June, assuming timely closing of the deal.

Quicksilver CEO Glenn Darden said the sale "enables us to focus our development efforts on the Barnett and Canadian projects, as well as our previously announced joint ventures in West Texas, and provides the opportunity to enhance company liquidity."

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