U.S. independent oil producer Anadarko Petroleum Corporation (APC) has entered a joint-venture agreement with Korea National Oil Corporation (KNOC) worth $1.55 billion. The effective date of the deal is January 1, 2011.
Under the deal, the Korean state-owned company will gain one-third interest in Anadarko’s Maverick Basin assets, located in the highly sought-after Eagleford shale of Texas. Korea National Oil will receive about 80,000 net acres in the Eagle Ford as well as 16,000 additional dry-gas acres in the Pearsall Shale, also located in South Texas.
The deal is so structured as to receive Korea National Oil’s consideration for the deal as investment in the field, instead of upfront cash. Anadarko said Korea National Oil will pay for all of Anadarko’s 2011 capital costs in the Maverick Basin.
Post 2011, Korea NOC will pay up to 90% of those costs until the investment runs out. Per projections, Korea National Oil’s $1.55 billion investment is expected to last until the end of 2013.
Additionally, Korea National Oil also has the option to elect to act as a partner with about 25% working interest in the associated gathering systems and facilities, by paying its share. The option has to be exercised within 30-days of closing the deal.
Anadarko’s liquids-rich Eagleford shale assets demonstrates substantial value with an extended midstream infrastructure and well-established service agreements concurrent with the company’s drilling pace in the region. As a result, Anadarko had become the largest producer in the play during the fourth quarter of 2010.
Going forward, Anadarko plans to further accelerate the value of this play by increasing the number of rigs operating in the region to ten, from nine, early in the second quarter of 2011.
The deal is expected to close in the second quarter of 2011, pending regulatory approvals.
Based in The Woodlands, Texas, Anadarko Petroleum is primarily engaged in the exploration, development, production, gathering, processing and marketing of natural gas, crude oil, condensate and natural gas liquids. Anadarko mainly competes with ConocoPhillips (COP) and Exxon Mobil Corp. (XOM).
We maintain our Neutral recommendation on Anadarko shares. Also, the company retains a short-term Zacks #3 Rank (Hold).
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