DALLAS--(BUSINESS WIRE)--Canaan Resources, LLC has retained Energy Capital Solutions, LLC to sell Canaan’s shallow Arkoma Basin assets located primarily in Pittsburgh and Hughes Counties, Oklahoma. This asset package produces 11.0 MMcfe/d and includes 560 producing wells and over 64,000 net acres, which are held by production. Canaan’s assets produce primarily from the Hartshorne Coal formation, and include additional acreage held by production, ancillary infrastructure assets and Canaan’s proprietary 3D seismic over the acreage. Non-binding indications of interest are due from interested parties by July 25.
The Canaan shallow assets produce predominantly from the Hartshorne Coal formation at a depth of 2,000’ to 2,500’, with additional shallow production from the Booch, Savanna, McAllister, and Bartlesville formations. During 2013, the Assets produced from 560 wells (85.2% operated) with an average WI/NRI of 79.4%/64.3% and generated revenue of $12.0MM from net production of 12.8 MMcfe/d (99.9% gas). The Assets include 64,144 net acres (92,772 gross) of HBP leasehold across Pittsburg, Hughes, McIntosh and Haskell Counties, and are depth limited to the base of the Hartshorne Coal formation. The Assets are currently operated by a contract operator who is available to continue operations on behalf of the purchaser of the Assets.
At the end of 2013, the Assets produced 11.8 MMcfe/d and generated $373,200 of cash flow and in April 2014, the Assets produced 11.0 MMcfe/d and generated $607,200 of cash flow. Current distributable cash flow is capable of funding the additional drilling required to offset normal production decline.
Netherland, Sewell & Associates, Inc.’s reserve report, as of December 31, 2013, estimated net PDP reserves of 26.5 Bcfe (PV-10 of $24.8 MM) and net Total Proved reserves of 43.3 Bcfe (PV-10 of $30.3 MM). NSAI identified 65 drilling locations, the majority of which target the Hartshorne Coal formation. The average Hartshorne Coal well has a payback of 19 months, gross capex of $0.4 MM, gross EUR of 400.0 MMcf and an average LOE cost of $0.63/Mcf.
This dry gas asset benefits from any increase in gas prices. An increase to $6.00/MMBtu could increase proved reserves to 47.1 Bcfe (PV-10 of $57.3 MM). In addition to NSAI’s estimated reserves, Canaan has identified incremental workover and recompletion work to 21 existing wells, which could add up to 1.8 MMcfe/d in daily production. Canaan has also developed an accelerated drilling program and identified additional stacked pay potential that could result in incremental reserves not evaluated by NSAI.
Energy Capital Solutions has a management presentation available and an online data room for interested parties to review the assets in more detail.
