Integrys Energy Group Announces Two Acquisitions

- Integrys Energy Group Announces Two Acquisitions



Sep 1, 2011

Integrys Energy Group (NYSE:TEG) announced the acquisition of two operating businesses involved in the compressed natural gas fueling business, Pinnacle CNG Systems and Trillium USA, previously owned by Wagner & Brown, Ltd.

Charlie Schrock, Integrys Chairman, President and Chief Executive Officer said, "Expansion into this business is consistent with our mission of providing customers with the best value in energy and related services. Our decision to enter this market is in response to customer needs, and this is complementary to our existing skill sets in regulated and nonregulated natural gas and electric services."

Integrys Energy has a potential upside of 2.4% based on a current price of $49.79 and an average consensus analyst price target of $51.

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Shale Plays, Foreign Investments Drive U.S. Oil & Gas M&A Value

- Shale Plays, Foreign Investments Drive U.S. Oil & Gas M&A Value

Thursday, August 11, 2011
PwC

Ongoing interest in shale acreage, deals for midstream assets and increased investments from foreign buyers in the U.S. oil and gas industry helped drive U.S. oil and gas mergers and acquisitions (M&A) value to $39 billion in the second quarter of 2011, according to PwC US.

In the second quarter of 2011, there were 51 deals with values greater than $50 million, compared to 61 announced deals totaling $41 billion in the same period last year. While the volume and value of transactions dipped slightly in the second quarter of 2011 when compared to the same period last year, average deal value for deals over $50 million jumped to $765 million in the second quarter 2011, a 14 percent increase over the same period last year when average deal value was $672 million.

"There continues to be steady M&A activity in the oil and gas sector with strong competition for prized assets, which has maintained the deal momentum throughout the first half of the year. The second half of the year has already kicked off with one mega deal announced, and we expect that deal momentum to continue," said Rick Roberge, principal in PwC's energy M&A practice. "Foreign and private equity interest in North American oil and gas assets remains very high and will likely be a driver of ongoing activity."

Foreign buyers announced 18 deals valued at over $50 million or more in the second quarter of 2011, which contributed $36.2 billion or 72 percent of total deal value, versus 27 deals valued at $24.2 billion in the same period last year.

For deals valued at over $50 million, there were 11 midstream deals that accounted for $19.9 billion, or 51 percent of total deal value, compared to six deals worth $3.4 billion in the same period last year. Transactions in the upstream space led all oil and gas subsectors with 26 deals, or 51 percent of volume in the second quarter.

According to PwC, seven of the top 10 deals by value in the second quarter of 2011 were related to shale plays, including four upstream deals and three transactions in the midstream and oil field services space. For all deals greater than $50 million, there were 10 shale-related transactions totaling $7.5 billion, or 19 percent of total deal value, including two deals involving the Marcellus Shale totaling $2.3 billion.

"Shale-gas assets continue to be very attractive acquisition targets as multinationals look to gain technical know-how and exploit the long-term value and opportunities from rising energy needs," said Steve Haffner, a Pittsburgh-based partner with PwC's energy practice. "At the same time, there is tremendous activity developing around natural gas infrastructure, which is necessary to move the extracted gas to market. The U.S. 'shale gale' continues to attract the attention of global companies."

There were five financial sponsor-backed transactions over $50 million, representing $6.1 billion, or 16 percent of total deal value, compared to 10 financial sponsor deals contributing $6.2 billion during the same period last year. During the first six months of 2011, there were 16 financial sponsor deals contributing $20.6 billion, a whopping 129 percent increase in deal value, compared to the first half of 2010 when there were 15 financial sponsor-backed deals, valued at $9.0 billion.

"With oil prices hovering at $100, private equity funds continue to make a very strong push in the oil and gas sector," added Roberge. "The private equity deal makers, who used to largely play in the midstream space, are now heavily involved in exploration and production (E&P), shale plays, and oil field services and equipment sector. However, along with the great opportunities and rewards of investing in oil and gas, there is still risk in this space – and new entrants need to understand the pitfalls before trying to exploit these possible opportunities."

For deals with values greater than $50 million, there were 18 corporate transactions totaling $26.8 billion or 69 percent of total second quarter deal value, compared to 22 deals that accounted for $25.9 billion in deal value in the same period last year. Thirty-three asset deals for a combined total of $12.2 billion were announced in the second quarter of 2011, versus 39 deals totaling $15.1 billion in the same period last year. However, when comparing the first six months of 2011 to the first half of 2010, the number of corporate transactions increased by three deals to 35 transactions, while total corporate deal value jumped 26 percent to $59.7 billion in 2011 from $47.6 billion in 2010.

Another potential driver for M&A activity is the desire from some oil companies to sell assets and break apart key lines of business, according to PwC.

"We believe that another factor to keep a close eye on throughout the year, which may add to the already robust M&A activity we're seeing, is the trend of integrated oil companies looking at the various options to unlock shareholder value through separating their E&P businesses," said Roberge. "While this trend could be a very positive driver of M&A activity, these are highly complex transactions with potential consequences around tax considerations, valuations and financial reporting. Companies should consider the risk with these types of transactions as every potential scenario needs to be thoroughly and diligently evaluated to succeed."

PwC's Oil & Gas M&A analysis is a quarterly report of announced U.S. transactions with value greater than $50 million analyzed by PwC using transaction data from John S. Herold, Inc.

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Key Extends Eagle Ford Footprint with Acquisitions

- Key Extends Eagle Ford Footprint with Acquisitions

Thursday, July 14, 2011
Key Energy Services Inc.

Key Energy has reached a definitive agreement to acquire Edge Oilfield Services and Summit Oilfield Services (collectively "Edge") for consideration of approximately $300 million, consisting of approximately 7.5 million shares of Key common stock and approximately $164 million in cash, which is subject to working capital and other adjustments at closing. Key anticipates funding the cash portion of the consideration from available cash and borrowings under its credit facility. In addition to the $300 million of consideration, Key has also agreed to reimburse or fund up to $40 million of Edge's pre-closing capital expenditures related to Edge's expansion into the Eagle Ford shale, which began generating revenue this quarter.

The closing of this transaction, which is expected to occur this quarter, is subject to customary conditions including the expiration or termination of the waiting period under the Hart-Scott-Rodino Act.

Edge primarily rents frac stack equipment used to support hydraulic fracturing operations and the associated flow back of frac fluids, proppants, oil and natural gas. It also provides well testing services, rental equipment such as pumps and power swivels, and oilfield fishing services. Following the close, Edge's results will be reflected within Key's existing Fishing & Rental Services line of business, which is included in its U.S. reportable segment.

Key's Chairman, President, and CEO, Dick Alario, stated, "Edge's high performance frac stack equipment enjoys strong growth opportunities, particularly in unconventional shale markets. Furthermore, its high revenue and profit per employee fits with our overall investment strategy and should prove beneficial, especially in today's tight labor market."

Alario continued, "Edge's existing business currently generates an annual EBITDA run rate of approximately $65 million. With the expansion into the Eagle Ford that is already underway, Edge believes its EBITDA run rate will be approximately $80 million by year-end 2011. We anticipate Edge's business to be accretive to Key's margins and earnings beginning in 2011. With Edge's experienced oilfield industry veterans, we intend to aggressively expand Edge's service offerings across Key's existing infrastructure, particularly in emerging unconventional shale markets."

Edge's CEO, Darrell Brewer, stated, "We look forward to becoming a part of Key, a high quality, industry leading company, where we can better leverage our business potential via Key's extensive U.S. footprint and financial resources and where our employees will continue to enjoy a bright future."

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Linc Expands US Acreage with Tx., La. Acquisitions

- Linc Expands US Acreage with Tx., La. Acquisitions

Monday, June 06, 2011
Linc Energy Ltd.

Linc announced that its wholly-owned subsidiary, Linc Gulf Coast Petroleum Inc., has acquired 14 producing oil fields (consisting of 156 leases covering approximately 13,400 acres) from ERG Resources LLC., for a price of US $236 million. The acquisition secures immediate oil production of approximately 3,300 barrels per day (BOPD), and a significant CO2 enhanced oil recovery (EOR) opportunity.

The 14 oil fields purchased from ERG Resources are located in Texas and Louisiana and are within the Gulf Coast Onshore and Inland Waters Regions and include all related infrastructure such as pipelines, tank batteries and processing facilities. All of the fields are either salt domes or faulted four-way closures related to deep-seated salt movement. Independent reports commissioned by Linc Energy indicate that the fields have the potential to increase recoverable oil by up to 24 million barrels by optimisation of current production and additional drilling operations.

Cumulative production for the 14 fields is estimated to be over 700 million barrels of oil to date with a regional recovery factor of approximately 40%, indicating a significant potential to achieve substantial increases in production from Enhanced Oil Recovery (CO2 flooding).

All of the acquired fields in the asset package are 100% operated by ERG Resources, with ERG Resources also holding 100% of the working interest in the majority of the fields.

A significant factor regarding this acquisition is that ERG Resources has to date only advanced significant development into one area, the Barbers Hill salt dome, achieving some excellent results. There are 6 more salt domes in the asset package that Linc Energy can assess to drill and expand with similar techniques to those that ERG Resources has utilized on the Barbers Hill field.

Texas oil fields

12 of the fields are located along the Texas Gulf Coast and Texas inland waters areas. The majority of the value at this stage is attributed to 5 of the 12 fields, being Barbers Hill, High Island, Port Neches, Atkinson Island and Cedar Point. Linc Energy anticipates additional value being attributed to the remaining assets once further evaluation has been completed.

Louisiana oil fields

Portions of the Leeville Field and the Black Bayou fields are part of the ERG Resources assets in Louisiana. The majority of the immediate opportunity in Louisiana is in the 100% owned and operated Black Bayou field. This field is one area that Linc Energy plans to aggressively drill in the coming 12 to 24 months to build production.

Key terms of the Agreement

The key terms of the Asset Purchase Agreement between Linc Energy and ERG Resources are as follows:

• The purchase price of the assets is US $236 million (subject to completion adjustments and necessary consents from parties holding a "first right of refusal" over approximately 4,300 acres of the acquired oil fields).
• The assets purchased consist primarily of oil & gas leases, property interests (including all related infrastructure such as pipelines, tank batteries and processing facilities) and 410 wells upon the Texas and Louisiana oil fields which are held directly by ERG Resources or by three wholly-owned subsidiaries of ERG Resources. Linc Energy will acquire the assets held by ERG Resources and will acquire 100% of the equity interests in the ERG Resources subsidiaries.
• The total area of these leases is approximately 13,400 acres held across 156 oil & gas leases with 410 wells of which 177 wells are currently producing.
• Completion of the transaction and operational handover is scheduled for 1 August 2011.

To support this acquisition and future expansion plans in the USA Gulf Coast region, Linc Energy will be opening a new office in Houston, Texas prior to the transaction completion date. At completion, Linc Energy will become the employer of most of the experienced team of professionals (approximately 25 staff), covering both field and office operations, who are currently employed by ERG Resources. These arrangements will ensure continuity of operations on the oil fields immediately on handover.

Funding

While Linc Energy can fund this acquisition from cash, the Company has mandated RBS (The Royal Bank of Scotland) to complete the financing to support both the ERG Resources asset acquisition and the first year of capital expenditure upon the ERG Resources (Gulf Coast) and the Rancher (Wyoming) assets to support Linc Energy's development plans. This debt financing will have minimal recourse to Linc Energy and the financing process is well underway. Under the current financing proposal, Linc Energy will provide approximately 25% of the capital.

Peter Bond, Chief Executive Officer of Linc Energy, said, "This acquisition is the next big necessary step that Linc Energy has taken to meet its two key business targets over the coming 12 to 18 months. The first of these targets is to achieve in excess of 20,000 barrels per day of oil production by the end of 2012, with at least 10,000 barrels of production by the end of 2011. The second key target for the Company, supported directly by achieving this first target, is to develop very profitable, solid cash flows from operations."

"Linc Energy has a number of excellent assets and will continue to acquire more. These assets will be systematically developed over the coming years, but to support the Company's long-term strategic plans, Linc Energy needs to focus on developing strong operational revenues that can support our growth. The reality is, Linc Energy can gain a permit to drill an oil well in days or at most a few weeks; we can then drill those oil wells similarly within weeks, meaning the time difference from project commitment to cash flow can literally be a few months. If I dare compare that timetable with the years of effort it takes to gain a permit on a coal mine or a GTL facility, you get the picture pretty quickly why it's necessary for the Company to be dynamic in its approach and to focus upon our immediate entrepreneurial targets and produce strong cash flows."

"Linc Energy's strategic plans have resulted in the Company gradually re-focusing its energies over the past several months, shifting its long term focus into three distinct areas covering our short, medium and long term goals. We are building the Company on 3 distinct fronts in Oil & Gas, Coal & Clean Coal and Clean Fuel & Clean Energy. On the Oil & Gas front, we are pursuing oil production assets that yield immediate revenue and profits. We are targeting assets that have the potential to increase production initially with aggressive drilling and workover campaigns, whilst also providing excellent long term opportunity to multiply our returns with Enhanced Oil Recovery from CO2 flooding that in some cases can last 10 to 20 years. This philosophy positions Linc Energy to obtain solid cash returns in the short term and yet keep those assets profitable and growing for many years to come."

"This ERG Resources asset package is a great example of what I'm saying. First, we already have good daily oil production of approximately 3,300 barrels per day, which is currently cash flow positive. Secondly there is a clear drilling and workover plan in place which is anticipated to effectively double this production to over 6,300 barrels per day in the next 12 to 18 months, improving cash flows and increasing the value of the assets."

"Finally, Linc Energy expects to use about 75% debt funding to purchase the ERG Resources assets. I've always run Linc Energy as a low to no debt company. However, my philosophy with ERG Resources and assets like them is that you borrow on cash flow positive assets that have the capability to comfortably pay their own debt down, minimizing the risk, whilst leveraging the upside opportunity. Simply put, because Linc Energy is buying cash flow positive oil production assets which we believe can easily cover their respective debt arrangements; and because we expect to increase oil production in the short-term from these oil assets, we can lower real cost and risk of funding. Combine all of this with the strong Australian dollar and suddenly it makes perfect sense to debt fund these assets."

"Personally, I strongly believe that Linc Energy can grow to greater than 100,000 barrels of oil per day production within the next 5 years, and I'm pleased to say this ERG Resources acquisition is the first BIG step towards that very goal, whilst also ticking another Linc Energy milestone. As always I look forward to updating you on the journey ahead. There will be a lot to keep up with, because there is now a lot of traction in the business," Mr Bond said.

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Carnarvon Boosts Reservoirs in Thai Concessions

Carnarvon Boosts Reservoirs in Thai Concessions

Friday, April 08, 2011

Carnarvon Petroleum Ltd.

Carnarvon announced the results of an independent reserves evaluation of its Thailand concessions as at December 31, 2010.

Carnarvon has a 40% equity interest in the SW1, L33/43 and L44/43 on-shore concessions (Pan Orient Energy Corp. 60%). The reserves estimates data has been certified by international energy consultants Gaffney, Cline and Associates (GCA).

At the end of the calendar year, proved and probable reserves at Carnarvon's Thailand concessions totaled 20.4 million barrels. This comprised proved reserves of 4.7 million barrels plus probable reserves of 15.7 million barrels.

The estimates include new oil field discoveries in 2010 in the Wichian Buri Extension (WBExt) field within the L44/43 concession and the L33 field in the L33/43 concession. The increase in reserves in these fields was offset by a downward revision of previously announced reserves in the NSE Central and NSE-F1 fields within the L44/43 concession. Carnarvon indicated the potential for the downward revision at these two reservoirs in October 2010.
The net present value of proved and probable reserves after tax for the three concessions in Thailand, using forecast oil prices and discounted at 10%, is A$307 million, representing A$0.45 per Carnarvon share, based on the current 687.8 million shares outstanding and an exchange rate of A$1.00 / US $1.04.

CEO Comment

Carnarvon CEO Ted Jacobson said, "These reserves estimates provide us with a much better understanding of this series of oil fields and give us greater confidence in the assessment of remaining oil.

"These are important assets for Carnarvon; they provides us with important cash flow and exploration and appraisal upside whilst enabling us to continuing to focus on upside via exploration and acquisitions in other regions.

"While we expected the revisions in reserves for the NSE Central and NSE-F1 reservoirs, the greater percentage of more conventional sandstone reservoirs means a longer, more consistent and predictable production for Carnarvon moving forward once these sandstone reservoirs have been fully developed.

"We have a long future in this range of assets and are excited about the broader opportunities for Carnarvon that the long term positive cash flows can achieve," said Mr Jacobson.