Ultra Petroleum To Buy Shell's Pinedale Assets

(RTTNews) - Independent exploration and production company Ultra Petroleum Corp. (UPL) said Thursday that it has agreed to acquire all of European oil giant Royal Dutch Shell plc's (RDS-B, RDSB.L, RDSA.L, RDS-A) Pinedale field properties in exchange for a portion of Ultra Petroleum's Marcellus Shale properties and $925 million in cash.

Under the purchase and sale deal with SWEPI LP, an affiliate of Shell, Ultra Petroleum will acquire Shell's interest in the Pinedale field in Wyoming, which is currently producing about 189 million cubic feet equivalent or MMcfe per day of natural gas and condensate. As a result of the transaction, Ultra Petroleum will operate about 1,577 gross wells, or about 68 percent of the Pinedale field.

In exchange, Shell will receive $925 million and about 155,000 net acres in the Marcellus Shale in Pennsylvania, which is primarily located in Tioga and Potter counties. Shell will obtain approximately 100 MMcfe per day of natural gas production.

Michael Watford, Chairman, President and Chief Executive Officer of Ultra Petroleum said, "This transaction is a strategic repositioning of our portfolio for improved returns, increased reserves, higher value markets, increased operatorship and increased control of capital allocation."

Houston, Texas-based Ultra Petroleum noted that the deal will expand its company-operated production to 82 percent from 62 percent, and also increase net proved reserves by 1.8 Tcfe and proved reserve value by $1.8 billion. The deal will also shift the corporate percentage of natural gas production sold in higher priced western markets to 92 percent from 76 percent.

Ultra Petroleum expects to finance the acquisition by issuing new debt at the subsidiary and parent level. The company anticipates the transaction to close in the third quarter with an effective date of April 1, 2014.

UPL is trading at $21.88, down $0.58 or 2.59 percent on a volume of 3.37 million shares.