Bloomberg News

Marubeni Buys Texas Eagle Ford Shale Stake for $1.3 Billion

January 09, 2012

(Updates with analyst comment in fourth paragraph.)

Jan. 6 (Bloomberg) -- Marubeni Corp., Japan’s biggest grain-trading company, agreed to buy a 35 percent stake in shale oil and gas acreage in the U.S. from Hunt Oil Co. in a $1.3 billion deal that includes future drilling costs.

The Tokyo-based company will acquire 52,000 net acres in the Eagle Ford area in Texas, it said in a statement on its website today. Maurbeni and Hunt plan to drill “several hundred” wells in the area over the next five to 10 years, according to the statement.

European and Asian energy producers are piling into North American shale, which the Energy Information Administration estimates can more than double the world’s gas reserves. Total SA and China Petrochemical Corp. have committed more than $7 billion in the past month to U.S. and Canadian projects, overlooking concern that the drilling, which fractures underground rocks with sand and chemicals, may cause earthquakes and contaminate drinking water.

“These prices are starting to look a bit toppy,” said Iain Armstrong, an analyst at broker Brewin Dolphin Ltd. in London. “At the moment there’s an oversupply of gas. And there’s still a debate about fracking and putting nasty chemicals into the ground.”

Japanese companies are boosting investments in new types of oil and gas assets to help reduce the country’s reliance on Middle Eastern supplies. Marubeni and Dallas-based Hunt agreed they would acquire more shale acreage in the Eagle Ford area, according to the statement.

Relative Value

Marubeni’s deal values the fields at about $25,000 an acre. Total’s $2.32 billion acquisition of a stake in the Utica region in New York from Chesapeake Energy Corp. was for about $15,000 an acre, according to Bloomberg calculations.

Sinopec’s Jan. 3 purchase of a one-third stake in Devon Energy Corp. exploration projects valued fields at about $5,500 an acre after drilling costs, according to Scott Hanold, an analyst at RBC Capital Markets in Minneapolis.

Marubeni fell 1 percent to 474 yen in Tokyo compared with a 1.2 percent decline in the benchmark Nikkei 225 Stock Average. The stock dropped 18 percent last year.

Japan, which buys almost all its energy needs from overseas, increased imports of liquefied natural gas after the March earthquake and tsunami knocked out nuclear reactors at Fukushima.

North Sea

Marubeni is involved in oil and gas projects in the Gulf of Mexico, North Sea, India and Qatar, according to the statement. Itochu Corp., Japan’s third-largest trading company, said in October 2010 it would invest $390 million to buy a 25 percent stake in about 88,000 acres of the Niobrara oil shale reserve in southeastern Wyoming from Fidelity Exploration & Production Co.

The U.S. overtook Russia in 2010 as the world’s largest gas producer as output from shale rose. Gas trapped in shale formations will provide 24 percent of all U.S. natural gas consumption in 2035, according to the Department of Energy.

Shale acquisitions helped push overseas offers for U.S. oil and gas fields to $51 billion last year, the most in at least 12 years, according to data compiled by Bloomberg. Melbourne-based BHP Billiton Ltd. led purchases in 2011 with the $12.1 billion takeover of Petrohawk Energy Corp.

--Editors: Will Kennedy, Stephen Cunningham

To contact the reporters on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net; Brian Swint in London at bswint@bloomberg.net

To contact the editors responsible for this story: Amit Prakash at aprakash1@bloomberg.net; Will Kennedy at wkennedy3@bloomberg.net


China's Killer Profits
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus