Warren Resources said Monday it is entering Pennsylvania’s Marcellus Shale region by acquiring essentially all of the Marcellus assets of Citrus Energy Corp, a Colorado-based driller, for $352.5 million.
Headquartered in New York, Warren Resources is an independent energy company with operations primarily focused on oil in California and natural gas in Wyoming.
The deal is in the "core-of-the-core" Marcellus Shale assets in Wyoming County, Pennsylvania, Warren said.
Meanwhile, Canonsburg-based driller Rice Energy Inc. announced Monday that it is buying Marcellus acreage in southwestern Pennsylvania from Chesapeake Energy for about $336 million.
To finance the deal with Citrus Energy, Warren plans to will issue $40 million in common stock priced at $6 per share. The rest of the funding will come through debt.
“This acquisition provides Warren with a substantial new basin platform in the prolific Marcellus Shale and adds a new core area to Warren's existing California oil and Wyoming natural gas assets,” the company said in a statement.
The assets being acquired are currently producing about 82 million net cubic feet per day of natural gas. Estimated net proved reserves, as of July 1, totaled about 208.3 billion cubic feet, of which 55 percent are classified as proved developed, according to the company.
Lance Peterson, president and co-founder of Citrus Energy, a closely held private corporation with operations in Pennsylvania, Oklahoma and Texas, will be joining Warren’s board of directors upon closing of the acquisition.
In addition, Citrus' key technical, operating and land personnel will be transitioning over to Warren as employees.
"We are acquiring some of the most economic wells in the 'core-of-the-core' Marcellus, directly south of Cabot [Oil and Gas]’s position,” said Philip Epstein, Warren's chairman and CEO, in Monday‘s announcement. “Our technical teams are optimistic about the potential to identify additional reserves, both in the Lower and Upper Marcellus, and we believe that we can achieve strong production results in both of these zones."
The deal is expected to close in August.
In conjunction with the closing of the purchase and sale agreement, Warren will hedge a significant portion of the acquired natural gas production. Warren has escrowed a 3 percent cash deposit to Citrus under the terms of the purchase agreement.
Stephanie Ritenbaugh: firstname.lastname@example.org or 412-263-4910