One day after closing on its $4.975 billion acquisition for 413,000 net acres in West Virginia and southern Pennsylvania, Southwestern Energy (ticker: SWN) spent another $394 million to increase its working interest. On December 23, 2014, SWN secured a 20% stake of Statoil’s (ticker: STO) remaining working interest, which equates to 30,000 acres and 29 MMcfe/d net to Southwestern.
The latest addition is an extension of the multi-billion dollar purchase from Chesapeake Energy (ticker: CHK) in October. Per the original terms, the average working interest of the acquired properties was 67.5% at the time of the release. According to SWN, the latest acquisition boosts its footprint by “approximately 5.8% to approximately 73.0%.”
The $4.975 billion purchase was revised downward from the initial price of $5.375 billion due to recent commodity price declines. Nearly all of the returned prices were spent in the latest deal, so, in a way, this could be seen as a bonus of sorts by adding a 5.8% working interest for the price originally planned.
The newest addition is the third in the last three months and the second in December alone. All of its recent deals have expanded SWN’s presence in the Marcellus/Utica region.
| Date | Seller | Price ($MM) | Net Acreage | Net Production (MMcfe/d) |
| Oct. 16 | Chesapeake |
$4,975 |
413,000 |
336 |
| Dec. 23 | Statoil |
$394 |
30,000 |
4 |
| Dec. 2 | WPX Energy |
$300 |
46,700 |
50 |
| Southwestern Total |
$5,669 |
489,700 |
390 |
|
Not including its latest acquisitions, SWN reported production of approximately 2,100 MMcfe/d in its Q3’14 results. The Marcellus produced approximately 730 MMcfe/d in the quarter so the pro forma assets, assuming production remains constant, will increase by 54% to 1,121 MMcfe/d. Overall production would stand to increase by approximately 18%.
| Date | Seller |
Price/Acre ($MM) |
Price/Flowing Mcfe |
| Oct. 16 | Chesapeake |
$13,014 |
$15,997 |
| Dec. 22 | CHK (revised) |
$12,046 |
$14,806 |
| Dec. 23 | Statoil |
$13,133 |
$98,500 |
| Dec. 2 | WPX Energy |
$6,423 |
$6,000 |
| Southwestern Total |
$11,576 |
$14,535 |
|
In a press release, Torstein Hole, Statoil senior vice president and US onshore head, said: “The transaction reduces Statoil’s non-operated holdings at an attractive price, demonstrating the value of the Marcellus assets. Our new partnership with Southwestern Energy provides us with an opportunity to maximize the value of an important growth asset in our US onshore portfolio. Southwestern is a very dynamic operator that will maximize the value and return.”
Statoil first entered into the joint venture with Chesapeake in 2008. In 2010, STO paid $253 million to acquire 59,000 net Marcellus acres ($4,324/acre) in 2010. A total of nine rigs were running in the region at the time of its Q3’14 earnings release in October.
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