A U.S. bankruptcy court has approved the sale of EdgeMarc Energy Holdings LLC’s natural gas assets in southeastern Ohio to Diversified Gas & Oil plc.
Diversified said it would pay $50 million in cash for the assets, which are currently producing 46 MMcfe/d, in a deal expected to close in September. EdgeMarc did not receive any other qualified offers during a recent auction.
The assets in Washington and Monroe counties include 12 gross producing Utica Shale wells and related facilities in addition to deep rights. The package also includes three drilled but uncompleted wells valued at $14 million that Diversified is considering selling or farming out for a share of the proceeds.
Diversified has spent heavily in recent years on a series of purchases that have transformed it into Appalachia’s largest conventional oil and gas producer. The company has amassed about 60,000 wells in Kentucky, Ohio, Pennsylvania, Tennessee, Virginia and West Virginia. While its assets are mostly conventional, the company has been adding unconventional shale wells in the region too.
The company is funding the acquisition with debt and said the deal would also include EdgeMarc’s 2019 and 2020 hedgebook for additional consideration of $2 million.
EdgeMarc filed for bankruptcy in May in order to sell all of its Appalachian assets after a pipeline explosion last year in western Pennsylvania stranded production in its core area. The company said it was forced to curtail volumes after Energy Transfer LP’s Revolution Pipeline exploded, and it said it couldn’t satisfy its long-haul transportation contracts as a result.
Founded in 2012, the company holds 45,000 gross acres in Butler County, PA, which was impacted by the blast, and in southeastern Ohio. The company is now faced with the challenge of selling its assets in western Pennsylvania, where the Revolution Pipeline remains offline as Energy Transfer has struggled to comply with the conditions set by state regulators before it can enter service again.
EdgeMarc is facing various challenges and competing claims that have been filed in the bankruptcy docket. Its owners, including Goldman Sachs Group Inc., have filed a lawsuit against Energy Transfer over the midstreamer’s responsibility for the explosion. Energy Transfer does not want a sale of the Pennsylvania properties to move forward if it involves claims against it. An auction for the Pennsylvania assets is scheduled for September.
EdgeMarc signed long-term natural gas gathering, processing and fractionation agreements with Energy Transfer in 2015 to build the Revolution system, which also includes a cryogenic plant. The 100-mile pipeline moved 400 MMcf/d of natural gas from Butler County to Washington County, PA.
A 24-inch gathering segment that’s part of the broader Revolution System exploded last September, destroying a nearby home and toppling power lines in Center Township, about 30 miles northwest of Pittsburgh.
ETP has had difficulties stabilizing the area and repairing erosion controls partly because of the area’s terrain. The company said the blast likely occurred due to the torrential rain and saturated ground that has plagued the region in recent years.
The incident has caused a headache for other operators as well. PennEnergy Resources LLC CEO Richard Weber said in June at an industry conference in Pittsburgh that the outage has cost his company at least $75 million in lost sales.
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