The Eagle Ford Shale play in south Texas created big news yesterday. Statoil ASA (STO) and Talisman Energy Inc. (TLM) entered into a definitive agreement to form a 50/50 joint venture for the acquisition of additional acreages in this play.
The news follows a deal between the leading U.S.natural gas producer Chesapeake Energy Corporation (CHK) and Chinese offshore major CNOOC Ltd. (CEO). Under this agreement, Chesapeake sold its one-third undivided interest in the Eagle Ford Shale to CNOOC for $2.16 billion.
The Statoil-Talisman deal is to acquire 97,000 net acres of Eagle Ford Shale properties from Enduring Resources for a total consideration of $1.325 billion. Talisman will act as the initial operator.
The net cost to Talisman for this new acreage will be approximately $485 million, after Statoil purchases a 50% working interest in Talisman’s existing 37,000 net acres in Eagle Ford. The transaction is expected to close by the year end.
Upon completion, Talisman will hold approximately 70,000 net acres in this play. Although, Talisman enjoys the initial operatorship, both companies agreed that Statoil will operate approximately 50% of the joint assets within three years.
The acquired properties hold nearly 800 million barrels of oil equivalent of net resources with half of it being condensate or natural gas liquids. Talisman estimates there are over 1,000 net drilling locations on the newly acquired acreage.
We believe more liquids in the reservoir pushed Eagle Ford Shale play to the center of attraction. Despite Statoil’s strong financial position, the company has been experiencing sluggishness in reserves replacement since last few years. The new acreages in Eagle Ford could help the company in this space. Statoil is currently rated Neutral with the Zacks #3 Rank (Hold).
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