El Paso Corporation and Kinder Morgan announced a $38 billion transaction where the later will acquire all of El Paso's assets. The deal will create a pipeline and midstream company that is the 4th largest energy company in North America (Enterprise Value of >$90 Billion). El Paso had plans to spin off its exploration and production business at the end of the year, but those plans are delayed until Kinder Morgan has full control of the assets. The company still plans to divest the E&P assets, but is more likely to sell individual assets instead of spinning off a new entity. That means there are Eagle Ford wells and acreage on the market.
An international company like BHP or the Eagle Ford partnership between Talisman and Statoil are the most logical bidders. The proximity fits and both entities have the cash.
El Paso's Eagle Ford assets are located in La Salle County, TX where both Petrohawk (now BHP) and Talisman-Statoil operate. The El Paso assets would compliment other transactions by the same companies:
- Talisman Acquires Common Resources Acreage for $359 Million (May 2010)
- Statoil - Talisman Acquire Enduring Resources Acreage for $1.3 Billion (Oct. 2010)
- SM Energy Sells Acreage to Statoil-Talisman for $225 Million(Jun 2011)
- Bhp buys Petrohawk (Jul 20111)
It's not Eagle Ford related, but Statoil announced the acquisition of Bakken focused Brigham Exploration on October 17, 2011. By becoming an onshore operator, I suspect the company's appetite for acreage will grow.
None of the three companies companies have been shy about acquiring U.S. shale assets. The El Paso acreage falls right in the middle of the Talisman-Statoil partnership and just west of BHP's Hawkville asset. It's a logical fit, but you never now how a company's appetite changes from day to day. With all of the bullish sentiment around the Eagle Ford, I doubt it will take long for someone to swoop in on this deal.
“On the PE side, the odds are that these assets would be sold separately,” said Adam Connors, a director in corporate finance group of boutique investment bank C.K. Cooper & Co. “There could also be another E&P company buying whole thing, but in terms of the odds of a PE firm picking up all of it and operating it effectively – they’re slim.”
The assets include El Paso’s “active drilling program” in the Eagle Ford Shale in South Texas, an emerging Wolfcamp position, as well as portions of its Gulf of Mexico and South Texas assets. It also includes Haynesville, Wilcox – a conventional gas play – and Altamont, up in the Rockies. Additional operations are in offshore Brazil and Egypt’s Western Desert.
Read more at wsj.com
R.T.