Southwestern to buy Chesapeake acreage
BY ROBERT L. BAKER
and DAVID FALCHEK
Southwestern Energy Co. which has an office in Lemon Twp., announced Monday it was committing to Wyoming County in an even bigger way.
The company announced it was spending $93 million and nearly doubling its acreage in the Marcellus Shale play with a purchase of natural gas rights from Chesapeake Energy Corp. of 162,000 acres.
That will boost the 7,000 acres it already has in Wyoming County with 53,000 from Chesapeake to 60,000 total net acres in Wyoming County.
“That is great news for us,” Wyoming County Chamber of Commerce executive director Maureen Dispenza said. “We are very excited with Southwestern’s safety record.”
She added, “Not only will this bring more folks to the county but it will mean more jobs and careers for our people since their local headquarters is already here.”
Southwestern has approximately 21,000 sq. ft. of office space and 8,400 sq. ft. of warehouse space just off Rt. 92 in Lemon Township.
On Tuesday morning, Susan Richardson, Southwestern’s director of corporate affairs in Houston, Texas, said it was too early to address how the office would change to accommodate the additional lease holdings.
Richardson said that the company would be releasing its quarterly earnings statement late Thursday, and would be followed Friday by a conference call with analysts and after that it should become clearer how things will change once Southwestern pays $93 million for the leasehold acres held by Chesapeake in a deal expected to close May 15.
Southwestern is a medium-sized player in massive Marcellus Shale play, but one with significant holdings in central and Northeast Pennsylvania.
This purchase will nearly double Southwestern’s holdings in the region to 337,300 acres.
Steve Mueller, president and CEO for Southwestern noted that the purchase “provides Southwestern with even greater exposure to a world-class resource where we can further showcase our operational strengths.”
And, he added the addition “strengthens our ability to provide future double-digit production and reserve growth.”
In addition to the Wyoming County acreage, the transaction includes 51,000 acres in Susquehanna County, 25,500 in Sullivan County, 15,000 in Tioga County, 14,000 in Lackawanna County, 3,000 in Luzerne County and 500 in Columbia County.
The transaction should have no effect on terms of the leases property owners signed with Chesapeake, said Steve Saunders, a Scranton-based energy attorney.
“Southwestern will just step into the shoes of Chesapeake,” he said.
Wyoming County recorder of deeds Dennis Montross agreed for the most part, but expected to see some re-researching of titles.
He noted that when Chesapeake made its major acquisition of acreage in Wyoming County as a result of a deal struck in September 2009 with the Wyoming County Landholders Group, at least 40,000 acres were included, and others were offered similar arrangements of $5,750 an acre.
They would have a little more than a fifth year left on their lease, Montross said.
The purchase price suggested to Saunders that some of the leased land may not have much value, but that portions of the portfolio do include valuable, gas rich land.
For example, 14,000 acres of leasehold acres in Lackawanna County included in the transaction, he said, is not thought to be worth much.
Saunders said Southwestern will likely let a good number of leases in marginal areas expire, while it renews leases and considers development in more promising areas.
The transaction has less of an effect on Chesapeake’s total Marcellus holdings of about 1.8 million acres. The company remains the second largest producer of natural gas.
Only Exxon Mobile Corp. produces more.
The sell-off is a turnabout from the early days of Marcellus Shale leasing, when Chesapeake aggressively courted property owners and outbid competitors, driving up lease payments to more than $5,000 per acre. The recent sale amounts to about $574 per acre.
The sale comes as the cash-poor Chesapeake continues to shed assets to finance drilling operations and right its balance sheet under direction of interim chief executive officer Steve Dixon.
Chesapeake pledged to sell up to $7 billion in oil and gas properties this year.
Earlier this year, the company sold off 850,000 of leasehold acres in the Mississippi Line to China Petroleum & Chemical Corp. for less than $2,400 per acre, a third of what Chesapeake had valued to the land in 2011 in analysts’ presentations.
Recently, Gastar Exploration Ltd said it planned to buy some of Chesapeake’s acreage and production in central Oklahoma for $85 million.