China Acquires More Shale Acreage in Texas: $1.7 Billion For 80,000 Net Acres In The Wolfcamp

This is old news for some; I can't remember if I've posted anything on it.

But it's part of one of the big stories (see sidebar at the right).

For newbies: as you read the story below, remember this bit of trivia about the Wolfcamp: the Wolfcamp is probably the thickest of any onshore U.S. oil shale play, with up to 1,000 feet of potential payout across hundreds of thousands of acres. In comparison, the middle Bakken is about 75 feet thick; thicker in some areas, less thick in other areas. The Three Forks, around 300 feet thick. (Again, these are my opinions, world view; others will have different numbers; their numbers are probably more reliable.)

The Oil & Gas Journal is reporting:

Sinochem Group has closed its previously announced $1.7 billion purchase of Wolfcamp assets in Texas from Pioneer Natural Resources Co.

PNR of Dallas sold 40% of its interest in 207,000 net acres in the horizontal Wolfcamp shale in the southern portion of the Spraberry trend.

Back-of-the-envelope (numbers rounded):

• 40% of 207,000 = 80,000 net acres
• $1.7 billion/80,000 = $20,000 / acre
• Obviously there is production, other assets but, for me, that gives me an idea of valuation of these acres. Production is close to 10,000 boepd, according to the press release, which, at $50/bbl = $200 million/year.  

According to the press release:

At closing, Sinochem paid $631 million in cash of which $109 million was Sinochem’s 40% share of net expenditures in the joint interest area.

Sinochem will pay the remaining $1.2 billion by carrying 75% of PNR’s share of future drilling costs until the drilling carry is fully utilized.

 Again, lots of "moving parts" and I may be misinterpreting the deal, but that's how I see it for now.