Shell Trades Pinedale, Haynesville Assets for Marcellus, Utica Acreage

By Brad Kramer August 18, 2014 View Profile

Royal Dutch Shell plc is eastbound and down, announcing transactions that will divest interests in the Wyoming and Louisiana and bulk up its assets in the northeast shale plays.

In two separate transactions announced Aug. 14, the company will exit its Pinedale and Haynesville onshore gas assets in Wyoming and Louisiana in exchange for approximately $2.1 billion and additional acreage in the Marcellus and Utica shale areas in Pennsylvania.

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In an agreement with Ultra Petroleum, Shell will acquire 155,000 net acres in the Marcellus and Utica areas and receive a cash payment of $925 million in exchange for 100 percent of Shell’s Pinedale asset in Wyoming, including associated gathering and processing contracts.

In a separate agreement with Vine Oil & Gas LP and its partner Blackstone, Shell has agreed to sell 100 percent of its Haynesville asset in Louisiana, including associated field facilities and infrastructure for $1.2 billion.

Both agreements are subject to closing.

“We continue to restructure and focus our North America shale oil and gas portfolio to deliver the most value in the longer term,” said Marvin Odum, Shell’s Upstream Americas director. “With this announcement we are adding highly attractive exploration acreage, where we have impressive well results in the Utica, and divesting our more mature Pinedale and Haynesville dry gas positions.”

The Shell net production from Pinedale in the second quarter 2014 was 190 million cubic feet per day (MMcf/d) of dry gas. During the first half of 2014, Ultra’s net production from the assets Shell is acquiring in Pennsylvania averaged 109 MMcf/d.

Shell’s Pinedale asset includes 19,000 net acres of leasehold interest, 1,108 gross wells and associated facilities and an average of 0.7 percent overriding royalty interest in 11,500 acres. The company will exchange the interest for cash and Ultra’s 100 percent interest in the Marshlands area (63,000 net acres), as well as its entire interest (92,000 net acres) in the Tioga Area of Mutual Interest (AMI), an unincorporated joint venture with Shell. After completion of this transaction, Shell will have a 100 percent interest in the Tioga AMI. The agreement was effective April 1 and is expected to close this year.

Shell’s Haynesville asset includes 107,000 net acres in northern Louisiana. The transaction includes 418 producing wells, 193 of them operated by Shell. As of July 1, the gross production from the Haynesville asset was approximately 700 MMcf/d of dry gas, with Shell’s net working interest share at approximately 250 MMcf/d. The agreement was effective July 1 and is expected to close in the fourth quarter of this year.