Privately held Chief Oil & Gas LLC, the second largest natural gas producer in the Barnett Shale of North Texas, will be up for sale by the end of the year, according to a company spokeswoman. Chief, which concentrates solely on the Barnett, currently produces 120 MMcf/d of gas and has about 230,000 leased acres.
Chief subsidiary Eagle Mountain Pipeline, located in Saginaw, TX, also will be sold. It currently treats about 100 MMcf/d for sale to local and regional markets, said spokeswoman Kristi Gittins.
From January to June 2005, Chief was the second leading producer in the Barnett, only trailing Devon Energy Corp., according to Ramona Nye at the Railroad Commission of Texas. Chief was the third leading producer in 2004. According to analysts, Chief could command a price of nearly $1.2 billion, or about $6,000 per acre. Nye noted that the Barnett Shale is the largest gas producing formation in the state, with production last year of about 370 Bcf.
Gittins said Wednesday the sale announcement was a complete surprise. Just two months ago, CEO Trevor Rees-Jones had “absolutely no intention” of selling the company. “This is very recent news,” said Gittins. However, with high gas prices and abundant opportunities, things fell into place. The 150-member workforce was told the news first, and the producer is now looking for an investment banker to take on the sale. There is no definite timetable for the sale, Gittins added.
“By the end of the month, Chief plans to hire an investment banker, and then we’ll set up a data room early next year,” said Gittins. She said there have been “a lot of phone calls,” but she did not know if there had been any official offers for the company. Royal Dutch Shell plc, which entered the Barnett last year, was rumored to be interested in Chief earlier this year.
Rees-Jones, who is also Chief’s president, founded the company in 1994 to concentrate on the Barnett basin in the Fort Worth area. Chief does not disclose revenue, but since 1997, it has drilled more than 250 wells. All of its leases are in the North Texas counties of Wise, Denton, Tarrant, Parker, Johnson and Hood. Chief has a drilling budget of more than $100 million a year and has been planning to drill more than 400 wells in the next five years.
The producer uses horizontal drilling in the shale, a process using underground pipes that allows drillers to reach gas reservoirs underneath buildings and even subdivisions. The method also allows drillers to penetrate more than one reservoir at once.
Gitten said only the assets are for sale — Rees-Jones will keep the Chief Oil & Gas name. “He’s only 54, and I expect he’ll stay in the business. It’s in his blood. I think he’ll continue in the business.”
According to RigData’s 2005 list (through Oct. 3) of the top 100 domestic operators ranked by footage drilled, Chief was 61st. RigData said Chief drilled 498,700 feet of wells, or 0.3% of the total, with average drilling at 8,905 feet. It also had 56 new well starts.
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