By Oil & Gas Financial Journal staff
PDC Energy (NASDAQ: PETD), through PDC Mountaineer LLC (PDCM), its JV with Lime Rock Partners V, has entered into an agreement to acquire the membership interests of Seneca-Upshur LLC for $152.2 million—$76.3 million estimated net cost to PDC Energy.
Under the terms of the agreement, PDCM is to acquire and operate approximately 90,000 net acres targeting the Marcellus Shale and 10,000 net acres prospective to the Huron Shale. The acreage is 100% held by production and has an average working interest of 95%.
The acreage set to be acquired has roughly 30 bcfe of net proved developed reserves and is producing 5.4 MMcfepd at present.
Development of the acquired acreage is schedule to commence in 2012.
PDC Energy anticipates funding the transaction, expected to close October 3, 2011, utilizing a drawing from its existing credit facility, and may seek reimbursement of the cost through selling non-core assets.
In relation to the transaction, PDCM has enhanced its long-term transportation commitment to Equitrans, a subsidiary of EQT Corp. (EQT), for Marcellus Shale production. The new commitment is for transporting up to 76 MMcfepd.
Betting on future higher natural gas prices?
In a note to investors September 27, Global Hunter Securities (GHS) called the acquisition “aggressive,” and noted that while the transaction metrics look attractive, “we are not as excited about more natural gas focused acreage/production given our macro view on natural gas prices.”
The transaction comes at a time of horrendous natural gas prices, noted GHS. “Only time will tell as to whether they are making a perfectly timed play on future higher natural gas prices, or will this force the company to access the capital markets to fund this growth.”
Perhaps, noted GHS, as winter approaches, the company will be provided an opportune time to hedge additional volumes.
Important to note, however, is the company’s plan to acquire and operate 30,000 acres of southeastern Ohio acreage prospective for the Utica Shale. The deal, announced in early September, has the Denver-based company entering the play for an investment of roughly $50 million to $10 million in 2011 and $40 million in 2012.
The natural gas company was one of the first to shift to liquids, and, as noted by GHS on September 8, may come away with a bargain as the Utica continues to show signs of being the next “it” play.
