Chief Oil & Gas Enters into Agreement With Enerplus to Further Develop Marcellus Shale
DALLAS, TX (August 19, 2009) - Chief Oil & Gas LLC ("Chief") announced today that it has entered into a Joint Development Agreement with Enerplus Resources Fund ("Enerplus") in the Marcellus Shale natural gas field in the Northeastern United States. Chief, along with Tug Hill, Inc. ("Tug Hill"), will sell 30% of its interest in the Marcellus for a total consideration of US$406 million of which US$162.4 million represents cash due at closing and US$243.6 million is to be paid as a carry of 50% of Chief's future drilling and completion costs. Chief and Tug Hill will also enter into an Area of Mutual Interest ("AMI") agreement with Enerplus that will allow for the pursuit of additional acreage in the Marcellus play. Chief will continue to operate the properties in which Enerplus has acquired interests. The deal is expected to close in mid September 2009 with an effective date of May 1, 2009. Bank of America Merrill Lynch acted as the exclusive financial advisor to Chief and Tug Hill with respect to the transaction.
Currently, Chief and Tug Hill own leasehold interest in 552,000 gross acres in the Marcellus shale fairway in the northeast and southwest portions of Pennsylvania and into West Virginia and Maryland, ranking them as one of the largest lease owners in the play. Since 2007, Chief has drilled 31 Marcellus Shale wells, 10 vertical and 21 horizontal. Total production from the first few wells placed into production is approximately 8.7 MMcfe/day gross.
Enerplus has also entered a long-term agreement with Chief Gathering LLC, an affiliate of Chief Oil & Gas LLC, for the gathering, dehydration, and compression of Enerplus' share of production. Chief Gathering LLC is one of the leaders in the building of gathering infrastructure to pipe Marcellus production to the Northeast markets.
Trevor Rees-Jones, President and CEO of Chief, today said the agreement reached with Enerplus will enhance Chief's operational capabilities in the Marcellus and allow the company to accelerate its drilling and development plans. "The alliance with Enerplus will help us expand our operations throughout the Marcellus Shale region, bringing jobs to those areas and enhancing the economic development potential," Rees-Jones said. "Chief is committed to being a major part of the growth of the Marcellus. Our partnership with Enerplus will help us reach those goals," Rees-Jones said.
In addition to being a leader in the development of the Marcellus, Chief also has made a commitment to helping the local communities where it operates prosper and grow. In May, Chief announced a $402,000 donation over the next three years to help fund an anti-gang mentoring program operated in the Pittsburgh Public Schools. In January, Chief donated $50,000 to help families struggling to pay their home heating bills in several Pennsylvania counties. Chief has also funded scholarships, bid on livestock at county fairs and made donations to local fire departments and emergency providers, ensuring continued education and providing safety gear.
About Chief Oil & Gas LLC
Based in Dallas, Texas, Chief Oil & Gas is a privately held, independent oil & gas company engaged in the exploration, development and production of oil and natural gas throughout the continental United States.
About Tug Hill, Inc
Tug Hill is a private diversified investment firm based in Fort Worth, Texas. The majority of its investments are in the U.S. domestic oil and gas sector, primarily as a non-operating investor partnered with leading operators and management teams in both conventional and unconventional oil and gas fields. Tug Hill also actively invests in real estate, private equity, and the public equity markets.