A&D Intelligence

When privately held Midcontinent EOR specialist Chaparral Energy Inc. announced it would buy Edge Petroleum Corp., estimated by one advisor at a deal value of some $510 million, in an aside on their wrap-up conference call Chaparral dropped a tidbit that they might be willing to part ways with some of the newly acquired assets and its own noncore properties.

The two companies are getting married with a lot of debt baggage—about $1.6 billion pro forma—and could use some payola for paydown.

OK City-based Chaparral CEO Mark Fischer says the company might consider divesting assets along the Louisiana Gulf Coast and in the Rockies. Arkansas shale gas properties were not for sale, he emphasized, although they have been considered for divestiture previously.

Edge Gulf Coast assets include 2,011 gross (575 net) acres in southern Louisiana in Acadia, Calcasieu, Lafayette, St. Landry and Vermilion parishes; 25,706 gross (13,563 net) acres in the Mississippi Interior Salt Basin and 44,732 gross (38,340 net) undeveloped acres in the Floyd shale play, although no reference was made to the MS/AL properties specifically.

Additionally, Chaparral holds some 51.5 MMcfe proved reserves in the Texas and Louisiana Gulf Coast with total production of 10.4 MMcfe. Its Rockies assets consist of some 44,000 gross developed acres (15,000 net) and 20,000 gross undeveloped acres (9,800 net). Total proved reserves are 22.3 MMcfe with average daily production of 2.6 MM.

No word as to what properties are specifically offered up, but feel free to ask. Fischer said they wanted to mesh the two portfolios and see what fit before deciding, suggesting South Texas properties from the two companies would likely come together as keepers and result in a Corpus Christi office. “We want to be sure we get our hands around everything before making a decision,” he said.

Not to mention the present 32% of Chaparral shares owned by Chesapeake Energy, bought for $277 million in 2006 at a time when the private needed a cash infusion. If you’re looking to buy into an equity position, CHK is hungry for cash to dig into its Haynesville and the time to sell Chaparral seems ripe.

Yeehaw. Round up them thar loose assets.

Steve Toon, Editor, A&D Watch; Contributing Editor, Oil and Gas Investor; www.OilandGasInvestor.com; stoon@hartenergy.com

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