In two press releases Monday, American Energy Partners LP announced agreements to purchase shale acreage in the Utica and Marcellus shale for $1.75 billion, and acreage in the Permian Basin in Texas for $2.5 billion. The deals are expected to close in the next 60 days.
American Energy Partners CEO Aubrey McClendon formed the company last year with financial backing from First Reserve Corp. and the son of retired Exxon CEO Lee Raymond. McClendon wasousted from his position as CEO of Chesapeake Energy Corp. last year due to “philosophical differences” with the board of directors. During his tenure at Chesapeake Energy, which he co-founded in 1990, he aggressively built the company’s shale portfolio. McClendon has raised $10 billion for American Energy Partners in the last nine months, and is now running five closely held affiliates, each focused on drilling in distinct locations. To date, American Energy has acquired or announced deals to acquire drilling rights on about 400,000 acres, equivalent to 3 percent of Chesapeake’s 12.79 million acres.
Affiliate American Energy – Utica LLC (AEU) will acquire 27,000 acres in Monroe County, Ohio. American Energy – Marcellus LLC (AEM), another American Energy Partners affiliate, will purchase 48,000 acres in West Virginia counties bordering Ohio. The Ohio acreage is expected to produce 40 million cubic feet of natural gas equivalent per day. The West Virginia acreage is expected to produce approximately 135 million cubic feet of natural gas equivalent per day. The two affiliates purchased the land from East Resources, Inc., and another undisclosed seller. The sellers are currently using two rigs to develop the acreage that is being acquired, and AEU and AEM plan to increase operated drilling activity to 4-6 rigs by year end 2015.
This is American Energy Partners’ seventh major acquisition in Utica, and it now holds approximately 280,000 acres – the largest leasehold position in Utica. The company has invested over $3.5 billion in Utica, and plans to drill 1,600 wells. In 2012, the U.S. Geological Survey estimated that the Utica shale contains 38 trillion cubic feet of undiscovered, technically recoverable natural gas, with a mean of 940 million barrels of unconventional oil resources and a mean of 208 million barrels of unconventional natural gas liquids. The Ohio Department of Natural Resources approved 32 new shale permits last week. To date, Ohio has approved 1,312 Utica shale permits, with 904 wells drilled and 467 in production. Ohio currently has 40 working rigs.
The Texas deal is American Energy Partners’ first acquisition in the Permian Basin. The Permian Basin has been producing oil since the 1920s, and is in the midst of a new drilling boom. American Energy – Permian Basin, LLC (AEPB) signed an agreement to acquire approximately 63,000 acres of leasehold in the southern Permian Basin in Reagan and Irion Counties. AEPB purchased the leasehold from affiliates of Denver-based Enduring Resources LLC for $2.5 billion. The property is expected to have a net production of 16,000 barrels of oil equivalent per day. The seller, an affiliate of Enduring Resources LLC, is currently operating four rigs in the area. AEPB said it plans to increase operated drilling activity to six to eight rigs by the end of 2015.