HOUSTON (The Deal) -- As has been rumored, American Energy Partners, headed by deposed Chesapeake Energy (CHK - Get Report) CEO Aubrey McClendon said Monday that its units bought properties in the Permian Basin, the Utica Shale and the Marcellus Shale from private equity-controlled companies for $4.25 billion.
American Energy-Permian Basin LLC bought 63,000 net acres of leasehold in the southern Permian primarily in Reagan and Irion Counties, Texas, from affiliates of Trilantic Capital Partners-backed Enduring Resources LLC of Denver for $2.5 billion. Separately, American Energy-Utica LLC picked up 27,000 net acres of leasehold in Monroe County, Ohio, from Kohlberg Kravis Roberts & Co.-backed East Resources Inc. and an unnamed private company and American Energy-Marcellus LLC purchased 48,000 net acres of leasehold in Doddridge, Harrison, Marion, Tyler and Wetzel Counties, W. Va., also from East Resources and an unnamed private company, for $1.75 billion.
Last month, Reuters reported that American Energy would buy Enduring for $2 billion. Shortly thereafter, the Deal reported from a source that American Energy was actually planning to announce $4.5 billion worth of property acquisitions, including some in the Marcellus Shale.
On Friday Upstreamonline.com reported that American Energy was working through a deal with HG Energy LLC, which was formed by former East Resources employees, to acquire the privately held company's package of 75,000 acres in the area for $2 billion, or $26,666 per acre.
The Permian properties have net production of 16,000 barrels of oil equivalent per day. The deal marks American Energy's entry into the play, where it intends to boost its position through additional acquisitions. Enduring is using four rigs to develop the Permian acreage and American Energy plans to boost operated drilling activity to six to eight rigs by the end of next year and drill up to 2,500 gross wells and 1,750 net wells on the acreage over the next 10 years.
The Utica properties are expected to have net production of 40 million cubic feet of natural gas equivalent per day when the deal closes. The sellers are using two rigs to develop the acreage, which American Energy's unit plans to boost to four to six rigs by the end of next year. It is American Energy's seventh major acquisition in the play boosting its leasehold to 280,000 net acres, the largest in the area. The unit has invested over $3.5 billion in the Utica to date and plans to drill 2,600 gross wells and 1,600 net wells on its acreage.
The Marcellus properties are expected to have net production of 135 million cubic feet of natural gas equivalent per day. The deal marks American Energy's entry into the southern part of the play and it plans to drill 410 gross wells and 355 net wells on the acreage.
The Utica and Marcellus deals are expected to be completed in 60 days. The company didn't say when it expects the Permian deal to close. Goldman Sachs Bank USA is providing the financing on all three.
Oklahoma City-based American Energy has raised committed equity and debt capital of $10 billion to fund the development of five play or strategy specific companies, which, besides the Permian, Utica and Marcellus units, include American Energy-Woodford LLC and American Energy-NonOp LLC.
McClendon formed American Energy in April of last year after being forced to leave Chesapeake under a cloud of self-dealing accusations. His lead equity investor is the Energy & Minerals Group, with additional equity provided by First Reserve Corp. (for American Energy-Utica), its management team and others.
Goldman, Sachs & Co.'s Suhail Sikhtian, Shane Young and Bruce Schwartz and Citi's Chris Miller, Chris Abbate and Mohammed Baabde advised American Energy on all three deals, with Tudor, Pickering, Holt & Co.'s Maynard Holt and Jeff Knupp also working on the Enduring acquisition. Sullivan & Cromwell LLP's George Sampas and John Estes, Commercial Law Group PC's Ray Lees and Porter Hedges LLP were American Energy's legal advisors on the transactions. Ralph Eads and Joe Gladbach from Jefferies LLC advised the sellers on all three deal while Michael Dillard and Michael Darden of Latham & Watkins LLP counseled Enduring and Baker Botts LLP represented East Resources and the unnamed private company on the Utica and Marcellus purchases.