By Jamison Cocklin July 29, 2020 naturalgasintel.com
Tokyo Gas Co. Ltd. said Wednesday it is increasing its stake in Haynesville Shale producer Castleton Resources LLC to expand its portfolio in North America.
Through a subsidiary, Tokyo Gas agreed to boost its ownership interest to 70% from 46% for an undisclosed amount. Castleton, a natural gas-focused operator with assets in East Texas that also targets the Cotton Valley formation, would then change its name to TG Natural Resources LLC. The deal is expected to close in August.
Tokyo Gas also said it plans to acquire additional oil and gas properties in Louisiana. The additional transaction is expected to increase Castleton production from 296 MMcfe/d to 473 MMcfe/d.
Tokyo Gas has global operations across the natural gas value chain, including production, liquefied natural gas (LNG) procurement, shipping and downstream operations. It’s been working to build out its footprint in North America under a broader strategy aimed at boosting overseas profits.
The company is Japan’s largest provider of city gas, serving more than 11 million customers in Tokyo and the surrounding region.
It owns 130,000 net acres in the Barnett Shale of North Texas and another 34,000 net acres in the Eagle Ford Shale of South Texas. The company also has power generation assets in North America, along with tolling capacity at the Cove Point LNG export terminal in Maryland. It has an agreement in place for capacity at the Energia Costa Azul LNG export project that is under development in Baja California.
Japan is the world’s largest LNG importer, taking in 76.9 million tons in 2019, according to the International Group of LNG Importers.
sounds like a good candidate to swoop in and buy CHK.
I think that Tokyo Gas's interest begins and ends with natural gas. I doubt they would want to buy CHK lock stock and barrel. Too many oily assets. After exiting bankruptcy I suspect we will see a few asset sales by CHK. Might one be their LA Haynesville/Bossier assets? Depends on how much of their overhead can be jettisoned thru Chapter 11 and their new Haynesville ROI. It will be interesting to see what the C Suite chooses to keep and what to attempt to sell. Maybe CHK will be in talks with Jerry again? I think that deal came close to being done and there was no way to know then what Q1 2020 would bring.
If I were interested (and, had a billion or two lying around or had lenders standing by), I would not have wanted to buy anything from CHK knowing the company would likely be in bankruptcy soon. Too much risk of getting a better deal later. But "now" is later, it seems to me.
Have you (I haven't) gone it to see what CHK's debt load looks like, and who the lenders/bond holders are? Not sure how easy it is to get that info.
We both know someone who might answer that question. The better deal would have come before bankruptcy. After a successful shedding of the underlying contractual obligations, the ROI should be improved on all CHK assets. How much is anyone's guess at this point.
It is helpful to recall that CHK, and other Haynesville Shale players, built gathering and treating systems that were later sold when the cash crunch came. In order to maximize the sale proceeds, CHK and others, signed deals with minimum volume commitments , high per mcf charges and guaranteed profit margins for midstream operators. Those deals maximized cash on the front end but saddled the O&G companies with onerous, long term costs. It is certainly worth mentioning that they saddled their royalty and working interests with those increased costs while not providing them with any benefits of the sale. Of course this was not just a Haynesville hiccup, companies did this across numerous basins. All those assets were burdened with those lousy and expensive post production costs. An interested buyer would want to wait to pull the trigger on a sale until CHK had shed those contractual obligations through bankruptcy.
Shale Driller Unloading Gas Fields for Pennies on the Dollar
Range Resources divesting assets acquired in biggest-ever deal
Bloomberg / By Joe Carroll
August 3, 2020, 3:56 PM PDT
Range Resources Corp. sold its Louisiana shale fields for about one-tenth of what it paid for them just four years ago as depressed natural gas prices hammered the heavily indebted driller.
Range agreed to sell the assets acquired in its 2016 takeover of Memorial Resource Development Corp. to Castleton Resources LLC for $245 million, according to statements by both companies Monday. Range stands to reap an additional $90 million in the future, contingent on higher commodity prices.
The $335 million potential total value compares to the $3.3 billion Range originally paid in an all-stock deal for the fields. The biggest-ever deal for Range turned into a bust when the company’s geologists and engineers soured on the quality of the rocks in early 2018.
Range fell 3% in post-market trading. The sale is expected to close this month and the effective date will be backdated to Feb. 1, according to the statement. Castleton Resources is owned by Castleton Commodities International LLC and Tokyo Gas Co.
Range bragged about their ability to drill better Terryville Complex wells and then went right out and proved that claim to be demonstrably false. At this point it is not clear that Castleton got a great deal. The Terryville Complex is about tapped out. Not much room left for additional wells. It is not a resource play, it is conventional tight LCV, and does not extend much outside of the lower two thirds of 19N-4W. The wells in the Choudrant and Ruston fields have been considerably less productive than the legacy Terryville wells.
Sad to see this happen but sometimes you have to say "uncle" and bail for whatever you can get.
Not the first time a company paid top dollar and ended up giving the assets away to get out and stop the bleeding.
Petrohawk bailed on the Terryville Complex in the early Haynesville Shale land rush to raise capital so Floyd could compete with Aubrey. Wildhorse Resources figured out the key to horizontal development and drilled hundreds of really good LCV wells, impressive volumes of wet gas. With a limited sweet spot and three landing zones, the company drilled hundreds of wells. I have been on one of their pads that had fourteen well signs. Below is a cut-and-paste of Section 14, 38 producing wells.
|Count||Well Serial||Well Name||Well Num||Field ID||Org ID||Parish||Upper Perf||Lower Perf||Total Depth||API Count||LUW Code||LUW Type||Well Status|
|1||35157||T L MCCRARY UNIT B-31||001||4499||9999||31||8912||8924||9200||1||30|
|2||75727||TAY SUC; T.C. COLVIN||001||4499||1193||31||9524||9596||10039||1||30|
|3||100605||ANNA D. WRIGHT ET AL||001||4499||1194||31||6909||6915||8215||2||30|
|4||101533||T L MCCRARY ETAL||002||4499||9999||31||7100||1||29|
|5||102341||ANNA D WRIGHT ETAL||001-D||4499||1194||31||7942||7957||8215||2||30|
|6||195613||HOSS E SUR;LA METH ORPHAN 14||001||4499||C332||31||7892||7927||9100||1||30|
|7||236416||LCV RA SUNN;T L MCCRARY 14||001-ALT||8891||R3800||31||9588||10861||11105||1||615036||2||10|
|8||236600||LCV RA SUNN;T L MCCRARY 14||002-ALT||8891||R3800||31||9550||11074||13414||1||615036||2||10|
|9||236766||LCV RA SUI;KING 14||001||4499||R3800||31||9650||11085||11170||1||615099||2||10|
|10||237075||LCV RA SUI;LA UNITED METH 14||001-ALT||4499||R3800||31||9537||11174||11395||1||615099||2||10|
|11||237076||LCV RA SUI;WRIGHT HEIRS 14||001-ALT||4499||R3800||31||9650||11280||11432||1||615099||2||10|
|12||237137||LCV RA SUI;LA METH ORPHAN 14||001-ALT||4499||R3800||31||9120||11002||11223||1||615099||2||10|
|13||237138||LCV RA SUI;CONSOL CRESCENT 14||001-ALT||4499||R3800||31||9592||11020||11225||1||615099||2||10|
|14||237183||LCV RA SUI;WRIGHT HEIRS 14||002-ALT||4499||R3800||31||8536||11210||11302||1||615099||2||10|
|15||237254||LCV RA SUI;KING 14||002-ALT||4499||R3800||31||9588||11112||11251||1||615099||2||10|
|16||237341||LCV RA SUI;T L MCCRARY 14 HK||001-ALT||4499||R3800||31||9778||11079||11240||1||615099||2||10|
|17||237342||LCV RA SUNN;T L MCCRARY 14||004-ALT||8891||R3800||31||9564||10994||11175||1||615036||2||10|
|18||237620||LCV RA SUNN;T L MCCRARY 14||003-ALT||8891||R3800||31||9581||10991||11150||1||615036||2||10|
|19||237766||LCV RA SUI;T L MCCRARY 14 HK||002-ALT||4499||R3800||31||9465||11050||11235||1||615099||2||10|
|20||237767||LCV RA SUI;T L MCCRARY 14 HK||003-ALT||4499||R3800||31||9591||11042||11245||1||615099||2||10|
|21||237925||LCV RA SUI;T L MCCRARY 14 HK||005-ALT||4499||R3800||31||9677||10997||11180||1||615099||2||10|
|22||237937||LCV RA SUI;T L MCCRARY 14 HK||004-ALT||4499||R3800||31||9600||11074||11200||1||615099||2||10|
|23||242471||LCV RA SUNN;T L MCCRARY 14||005-ALT||8891||R3800||31||9666||11050||11260||1||615036||2||10|
|24||243182||LCV RA SUI;KING 14||003-ALT||4499||W192||31||11331||2||03|
|25||244334||LCV RA SUI;KING 14||003-ALT||4499||R3800||31||9494||11202||11434||2||615099||2||10|
|26||244387||LCV RA SUNN;T L MCCRARY 14 H||001-ALT||8891||R3800||31||11802||16346||16490||1||615036||2||10|
|27||245789||LCV RA SUI;LA METH ORPHAN 14 H||003-ALT||4499||W192||31||1||03|
|28||247292||LCV RA SUI;TL MCCRARY 14-11 HC||005-ALT||4499||R3800||31||11110||16985||17097||1||615099||2||10|
|29||247293||TL MCCRARY 14-11 H||006||4499||W192||31||10124||1||29|
|30||247480||LCV RA SUI;TL MCCRARY 14-11 HC||001-ALT||4499||R3800||31||11182||15392||15587||1||615099||2||10|
|31||247481||LCV RA SUI;TL MCCRARY 14-11 HC||002-ALT||4499||R3800||31||11382||15392||15474||1||615099||2||10|
|32||247482||LCV RA SUI;TL MCCRARY 14-11 HC||003-ALT||4499||R3800||31||11175||15795||15960||1||615099||2||10|
|33||247483||LCV RA SUI;TL MCCRARY 14-11 HC||004-ALT||4499||R3800||31||10779||15589||15726||1||615014||2||10|
|34||248022||LCV RA SUNN;MCCRARY 14-11 HC||007-ALT||8891||R3800||31||11240||17607||17732||1||615036||2||10|
|35||248023||LCV RA SUNN;MCCRARY 14-11 HC||008-ALT||8891||R3800||31||10306||17458||17597||1||615036||2||10|
|36||248045||LCV RA SUNN;MCCRARY 14-23-26HC||001-ALT||8891||R3800||31||11386||18396||18450||1||615333||2||10|
|37||248314||LCV RA SUNN;MCCRARY 13-24-25HC||001-ALT||8891||R3800||31||10890||17795||17962||1||615036||2||10|
|38||248344||LCV RA SUNN;MCCRARY 14-23-26HC||002-ALT||8891||R3800||31||10828||17397||17765||1||615036||2||10|
|39||249001||LCV RA SUNN;MCCRARY 14-23-26HC||003-ALT||8891||R3800||31||11159||19148||19285||1||615036||2||10|
|40||249002||LCV RA SUNN;MCCRARY 14-23-26HC||004-ALT||8891||R3800||31||10710||18862||19000||1||615036||2||10|
|41||249003||LCV RA SUNN;MCCRARY 14-23-26HC||005-ALT||8891||R3800||31||10734||18686||18870||1||615036||2||10|
|42||249004||LCV RA SUNN;MCCRARY 14-23-26HC||006-ALT||8891||R3800||31||10978||18926||19082||1||615036||2||10|
|43||249005||LCV RA SUI;MCCRARY 14-23-26HC||007-ALT||4499||R3800||31||11062||19214||19352||1||615099||2||10|
|44||249006||LCV RA SUI; MCCRARY 14-23-26HC||008-ALT||4499||R3800||31||11014||19003||19119||1||615099||2||10|
|45||249917||LCV RA SUNN;MCCRARY 14-11 HC||009-ALT||8891||R3800||31||10405||17712||17829||1||615036||2||10|
|46||249938||LCV RA SUNN;MCCRARY 23-26 HC||001-ALT||8891||R3800||31||10419||19928||20046||1||615036||2||10|
|47||249939||LCV RA SUNN;MCCRARY 23-26 HC||002-ALT||8891||R3800||31||10877||19248||19395||1||615036||2||10|
So subsurface changes in geology and reservoir quality are the key to the prospectivity in the Terryville Complex?? I bet many thought that this was a more blanket geology / extensive system of "good rock".
As always, the rock is the key to plays like this. And some companies don't have the expertise or creativity to dive deep into the rock and figure it out.
The Complex is heavily faulted in the northern third of the township. South of the township is the city of Ruston which makes development more difficult. Range leased some large tracts within the city limits which were never drilled. Wells drilled to the east (Choudrant Field) have not been as prolific but might be economic in a better commodity price climate. There are also a handful of wells south of Ruston in Jackson Parish. Those wells are also not as productive as Terryville. The same productivity decline occurs not far west of the township. I visited several of the pads for well tests west of the Complex and none were ever completed so I surmise that Wildhorse did not find what they were looking for.