Utica Shale

Magnum Hunter Resources Adds To Utica Shale Position

Magnum Hunter Resources (MHR) reported the purchase of additional leasehold in Ohio that is prospective for the Utica Shale formation.

Magnum Hunter Resources purchased approximately 15,558 gross or 12,186 net acres for $24.8 million, or a net price of $2,037 per acre.  The acreage is located in Noble County, Ohio.

Magnum Hunter Resources said that the majority of the acreage was held by production from shallower formations.

Magnum Hunter Resources said that the acquired acreage is close to the company’s existing position in Washington and Noble Counties, and brings its total position prospective for the Utica Shale to 23,214 gross or 17,316 net acres.

Chesapeake Energy Reports Two Utica Shale Joint Ventures

Chesapeake Energy (CHK) announced two joint venture transactions involving the company’s properties in Ohio that are prospective for the Utica Shale.  The company expects to receive $3.4 billion in proceeds from the deals.

Transaction One

Chesapeake Energy reported selling a 25% interest in 650,000 net acres of leasehold in the wet gas area of the Utica Shale.  The company owns 570,000 net acres and EnerVest owns the other 80,000 net acres.  

Chesapeake Energy will receive $2.14 billion, with $640 million in cash and $1.5 billion as a drilling carry.  The company expects to utilize this drilling carry by the end of 2014. EnerVest will receive $300 million from the deal.

This joint venture deal is with an unidentified international major oil company and values the acreage at $15,000 per acre.  Chesapeake Energy will be the operator of the joint venture.

Transaction Two

Chesapeake Energy has created a new entity called CHK Utica, L.L.C and issued $500 million of perpetual preferred stock in this entity to EIG Global Energy Partners. Chesapeake Energy is planning to sell an additional $750 million of these shares to other investors.

CHK Utica, L.L.C is a subsidiary of the company and owns 700,000 net acres of Utica Shale leasehold in Eastern Ohio.  The perpetual preferred stock comes with a 7% distribution, paid out every quarter.  Other details on the preferred stock:

• Issuer retains an option to repurchase the shares prior to 10/31/2018 at a valuation equal to the greatest of a 10% IRR or a 1.4 return on investment.
• Holders of the shares also receive a 3% overriding royalty interest in the first 1,500 net Utica Shale wells drilled by CHK Utica, L.L.C.

Exxon Mobil Plans First Utica Shale Well in 2012

Exxon Mobil (XOM) commented on the company’s development plans in the Utica Shale in 2012.  The company picked up acreage here through the acquisition of Phillips Resources in June 2011, and has also been leasing acreage on its own.

Utica Shale

“Exxon Mobil is also actively exploring several other early stage liquids-rich play in the United States, including the Utica Shale play in eastern Ohio and western Pennsylvania. Our position in the Utica stems from our recently completed acquisition of the Phillips companies and represents incremental upside to the Phillips acquisition, which was focused on the Marcellus. The Phillips acquisition included 45,000 net acres prospective for the Utica in Ohio, and we have increased our position now to over 75,000 net acres. We anticipate drilling our first Utica well in early 2012.”

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