EOG Accelerates Eaglebine JV With ZaZa by Electing Into Phase II

Phase III Election Timeline Moved From January 2015 to January 2014
ZaZa Energy Eaglebine Map

ZaZa Energy Eaglebine Map | Click to Enlarge

EOG Resources joint venture with ZaZa in the Eaglebine is moving into phase two of three. EOG is expected to complete the first three wells this year and was expected to elect into phase two in early 2014. Instead, the company has accelerated its plans.

The deal includes several forms of consideration, so we’ll break it out by company:

EOG receives the following:

  • 20,000 net acres as part of agreeing to phase II
  • The companies also agree that EOG will receive an additional 6,000 net acres if the company elects into phase II on or before January 31, 2014

ZaZa receives:

  • $17 million
  • Interests in 15 wells outside the current AMI in Madison County, with a PDP present value of $3 million
  • Costs carry on 1 vertical well, two horizontal wells, and a $1.25 million credit toward land & operational expenses
  • As part of phase III, ZaZa will receive additional interests in the Southern Madison County wells valued at $9 million
  • Additionally in phase II, ZaZa retains 14,000 net acres that EOG can elect into on or before January 31, 2014

ZaZa also receives a 25% interest in approximately 19,000 net acres that have been acquired by EOG in exchange for $2 million plus additional acreage. ZaZa is assigning a 75% working interest in approximately 18,500 net acres in Walker and Madison counties.

Todd A. Brooks, ZaZa’s CEO, stated “This is a significant step forward for our company as we establish our production base and create the right platform for growth. Through this transaction we’ve successfully increased our contiguous JV acreage footprint, established $16.1 million in PDP value across interests in 23 producing wells and will see an influx of $16.5 million in net cash.”

While two wells are still waiting to be completed, I believe this deal signals that EOG is confident in what they’ve seen from operated and non-operated wells in the area. There would not have been a reason to accelerate the timeline without an optimistic outlook.

Watch to see if EOG elects into phase three later in the year or in January 2014. If they do, I believe we’ll see the companies planning for development instead of exploration at some point in 2014.

Read the full press release at zazaenergy.com

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R.T. Dukes

R.T. Dukes

Managing Editor at EagleFordShale.com
R.T. is the managing editor of EagleFordShale.com. In prior roles, he advised major oil companies on strategy, the macro business environment, and opportunity screening. 2503 Robinhood, Houston, TX, 77005, U.S.A. | Telephone: 832.429.4790

Comments

  1. Has anyone been renewed by ZAZA in the Sweet Home Prospect??
    We note that ZaZa continues to show the Sweet Home Prospect area on their maps, and included in the area shown to be in the lower Eaglebine Prospect and yet we can find no one who has been renewed in the Sweet Home Prospect area.

  2. Assets are in Walker County, not Madison County. I agree, looks like EOG has liked what they have seen in the True Grit 1H.

    • R.T. Dukes R.T. Dukes says:

      Thanks Trey,

      Are you referring to the second bullet under “ZaZa receives” above?

      I read the release to say it was outside of Madison County, but wasn’t sure where.

      Thank you,

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