Unit Corp.'s Unit Petroleum subsidiary will buy oil and natural gas assets from Noble Energy in western Oklahoma and the Texas Panhandle for $617.1 million, the Tulsa, Oklahoma-based company said Wednesday.
Unit said the assets include about 84,000 net acres primarily in the Granite Wash, Cleveland, and Marmaton plays. The effective date of the purchase is April 2 and Unit said it expects to complete the deal in September.
As of the effective date, the estimated proved reserves of the properties is 44 million barrels of oil equivalent and the estimated average net production is 10,000 boe/d. Unit said the acquisition will add roughly 25,000 net acres to Unit Petroleum's Granite Wash core area in the Texas Panhandle and would include 617 potential horizontal drilling locations. Unit also will receive two gathering systems as part of the transaction.
Noble in a statement said production from the assets consists of 65% natural gas, 27% natural gas liquids and 8% oil.
"We are pleased to announce this strategic acquisition for Unit," President and CEO Larry Pinkston, said in a statement. "This is an important growth step for Unit and represents a unique opportunity that benefits all three of our business segments. For our upstream business segment, it will more than double our acreage in the Granite Wash Texas Panhandle core area, a highly prolific liquids-rich fairway in the Anadarko Basin. We plan to accelerate the drilling activity in the acquired properties over the next 12 to 18 months using seven rigs from our contract drilling segment, and we plan to operate the acquired gathering systems and, as appropriate, replace existing third party processing contracts beginning in 2015."
Unit said it will finance the purchase with long-term debt and plans to increase commitments under its existing credit facility from $250 million to $750 million. In addition, it said Unit Petroleum has identified $200 to $300 million of certain upstream assets it is considering selling.
Noble Energy President and Chief Operating Officer David Stover said the sale "is part of our previously announced non-core divestiture plan which will allow us to allocate capital and people to high-value and high-growth areas. Furthermore, it will provide additional flexibility in the implementation of our international program and the acceleration of the horizontal oil play in the DJ Basin."
Analyst Michael Hall, of investment bank Baird, called the deal's metrics "reasonably healthy" at around $7,345/acre and $10,280/Mcf of equivalent natural gas production and said it compares well to recent industry divestitures.
In addition, "we see the divestiture of non-core assets as providing Noble with additional capital to fuel development in its core US onshore holdings," Hall said in a Wednesday note.
For years Noble has been a big player in Colorado's Wattenberg field and DJ Basin. The company also has a core operation in Pennsylvania's Marcellus gas field and is a major player offshore Israel where it has made numerous gas discoveries.
"Our discussions with the company indicate Noble is currently entertaining bids on its Permian and Kansas assets, with a sale announcement likely in second-half 2012," Hall said.
