Midstates Petroleum (NYSE: MPO) Buys Oil Assets

Brian Hicks

Written By Brian Hicks

Posted April 5, 2013

Business activity continues to flourish in the Anadarko Basin.

Midstates Petroleum Co. (NYSE: MPO) made a deal with Panther Energy, LLC in the acquisition of developed and undeveloped lands in Texas and Oklahoma. Midstates is serious about the deal, pledging $620 million in cash.

The company will raise between $725 and $750 million for the deal. Midstates also acquired a $620 million bridge loan from Stanley Senior Funding, Inc. and SunTrust Robinson Humphrey Inc, according to NASDAQ.

The company believes the acquisitions will expand its fourth quarter earnings by 50 percent or more. Of the additional 36.4 million barrels of proven reserves, 45 percent is oil and 21 percent is natural gas. Daily production for the company will rise to 8,000 bpd.

super frackRegarding land, the deal includes 140,000 net acres with around 280 gross wells, of which 80 percent are currently active. Midstates plans to drill 40 to 45 wells this year on the newly acquired land.

Panther Energy partners include LINN Energy Holdings LLC (NASDAQ: LINE) and Red Willow Mid-Continent LLC. This business alliance is known as Panther. Panther and Red Willow fall under subsidiaries of Southern Ute Indian Tribe Growth Fund, which manages any business activity conducted by the tribe.

The deal itself went into effect on April 1st, with an expected close date of May 31st.

The deal highlights the importance of Anadarko Basin.

Anadarko Basin

Anadarko is a widely expansive territory of 50,000 square miles – covering the Texas Panhandle, western Oklahoma and western Kansas, and southeastern Colorado. The basin holds some of the most significant reserves of natural gas in the country.

Anadarko is part of the shale oil boom that has over-swept a large portion of the country. There have been significant discoveries of oil and gas reserves in Anadarko since the 1920s.

Chesapeake Energy (NYSE: CHK), Apache Corp. (NYSE: APA), and Forest Oil Group (NYSE: FST) are a few of the many companies drilling in the area.

According to the Chesapeake official website, Oklahoma’s Buffalo Creek-117 natural gas well – one of Chesapeake’s largest – brought in 41 million cubic feet of natural gas, and in 2011 it produced over 60 billion cubic feet. The well still benefits Chesapeake by bringing in 8 million cubic feet of natural gas per day.

The basin also brought Chesapeake’s largest oil splurge in company history: the Thurman Horn 406H well in Wheeler Country, Texas. This well yielded 6,780 bpd of crude, 1,248 bpd of LNG, and 4.8 million cubic feet per day at its peak.

All Eyes on Texas Oil

Investors should see Texas oil with great optimism. Drilling permits in the first two months of 2013 jumped 10 percent compared to the first part of 2012. Last year, Texas oil production went up by 100 million barrels, as reported by Fuel Fix.

The Texas Independent Producers & Royalty Owners Association released a report stating Texas employed 379,800 people in oil industry during the first six months of 2012.

In a bad economy where many people are changing jobs and careers, many seek to find a new life in the Texas oil boom. Investors should also pay attention because Texas’ oil industry is undergoing tremendous growth.

Between the Permian and Anadarko Basins, Texas is the place to be for work and investment.

And let’s not forget Eagle Ford Shale of South Texas.

According to Fox Business, oil companies are expected to spend $28 billion of investment capital in Eagle Ford Shale this year. Based on capital spending, this makes Eagle Ford the largest developmental project in the world. San Antonio’s Institute for Economic Development produced a figure of 116,972 full-time jobs, with an output of $62.3 billion, and $42 billion in gross regional product by 2021.

Jobs within the Texas oil industry require skilled labor, keeping industry standards intact.

Texas is fortunate enough to have lucrative areas in nearly every corner of the state. When it comes to oil and gas investing in Texas, investors can look to make many places: Haynesville Shale in the east, Eagle Ford Shale in the south, Anadarko Basin in the north, and Permian Basin in the west.

All of these regions have provided jobs and profit for companies and investors – making Texas one of the most attractive states for oil investment. Petrohawk Energy (NYSE: HK) is one company in Eagle Ford Shale and Haynesville Shale that has managed to attain drilling success in these areas.

There is no doubt regarding Texas oil and gas reserves, but the methods behind the successful extractions are paramount. New technology and drilling methods are the driving factor behind the shale oil boom.

Texas is important not only because of its resources, but also because the state’s fracking laws are not as stringent as in other states. New York’s ban on fracking, for example, is holding back progress in Marcellus Shale.

Fracking is becoming one of the most important drilling methods when it comes to breaking shale ground and reaching more reserves. Even the most ardent opponents are conceding that fracking is necessary; New York officials are considering lifting the fracking ban in their state.

In essence, oil companies that do business in states with fewer fracking regulations stand a higher chance of finding the most precious resources.


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