Devon Energy has agreed to sell its Cherokee coalbed methane project in the Anadarko Basin in southeastern Kansas and northeastern Oklahoma to Oklahoma City-based Quest Resource Corp. for $126 million, which Devon said is approximately equal to its net investment in the assets. The deals is expected to close next week.
Quest will receive 330 producing wells, 200 miles of gathering pipelines and interests in 375,000 leasehold acres, which more than triples its current position in the region. Quest has been developing new gas wells on its 135,000 acres of oil and gas leases located in Kansas and Oklahoma, where it also owns a 600-mile gas gathering system. The gathering lines collect 450,000 MMBtu of gas per month, 78% of which is Quest’s own production. It also recently acquired a 63,000 acre coalbed methane lease in western Kentucky.
Devon’s Cherokee coalbed methane operations included estimated proved reserves of 109 Bcf of gas, of which 58% were classified as proved producing. The wells currently produce 20 MMcf/d.
Devon said it will continue to own and operate about 41,000 acres of conventional and coalbed methane resources in the Arkoma basin in central Oklahoma.
The transaction is subject to regulatory and other approvals. Should the transaction fail to close after all closing conditions are satisfied, Devon is entitled to retain a $5 million earnest money deposit.
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