Chevron reviewing options for East Texas assets after shale acquisitions

Chevron said it is evaluating options for around 70,000 net acres of land in East Texas' Haynesville shale formation

Story By Sabrina ValleShariq Khan and David French|Reuters| Chevron Corp (CVX.N) said it is evaluating options for around 70,000 net acres of land in East Texas’ Haynesville shale formation after pausing development earlier this year, with sources saying a full sale is one option under consideration.

The move would be a small first step by the energy major which is seeking to offload assets worth up to $15 billion over the next five years following its recent multi-billion dollar acquisitions of more than 700,000 acres in U.S. shale assets.

Chevron last month said it would enter the Bakken basin of North Dakota with a $53 billion acquisition of Hess Corp (HES.N). In August, it concluded the $6.3 billion acquisition of PDC Energy, which expanded its reserves in the Permian and DJ basins.

The deals added almost 500,000 barrels per day of oil and gas in the U.S. shale to Chevron’s portfolio.

“Chevron is evaluating opportunities for our East Texas assets and is committed to safely delivering high returns and lower carbon,” a Chevron spokesperson said in response to questions from Reuters. They declined to comment further on the process.

Among the options Chevron is considering is a full sale of the Haynesville assets, two sources familiar with the discussions said. The company informed some potential buyers of its plans to market the assets early next year, in the days following its Hess takeover announcement, the sources added.

The sources requested anonymity to discuss confidential information and noted that a sale is not guaranteed. Chevron could still consider other options for the land, including a partnership with other producers in the region who could develop the assets in return for a split of the profits, one of the sources said.

Dealmaking interest in the Haynesville is likely to pick up due to the region’s proximity to existing and planned liquefied natural gas export projects along the U.S. Gulf Coast, according to bankers and others involved in energy transactions.

Demand for U.S. LNG exports shot up after Russia’s invasion of Ukraine last year led to Western sanctions on Moscow’s energy trade.

The acreage is likely to be valued in the low hundreds of millions of dollars, two sources said, with one of the sources adding that Chevron produces around 40 million cubic feet equivalent per day of natural gas from a small part of the Haynesville holdings.

The asset’s valuation will ultimately depend on various factors, one source cautioned, including commodity price forecasts at the time of bidding and how much worth bidders put on the land’s untapped potential.

Most of the land is undeveloped, and the Chevron spokesperson confirmed Haynesville development activities were paused in July “as a part of regular business planning and portfolio prioritization.”

Given much of the asset remains to be developed, this could draw in potential buyers seeking to bolster their own positions in the basin, at a time when energy investors are favoring companies with many years of reserves.

London-based BP (BP.L) has held talks with several companies about tying up operations in the Haynesville shale gas basin, Reuters reported last month.

Reporting by Sabrina Valle, Shariq Khan and David French; Editing by Lincoln Feast.

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Haynesville/Bossier Shale

Information & Statistics

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What is the Haynesville/Bossier Shale?

The Haynesville/Bossier Shale, located in East Texas (Railroad Commission of Texas District 6) and Western Louisiana, is a hydrocarbon-producing geological formation capable of producing large amounts of gas. The productive interval of the shale is greater than 10,000 feet below the land surface. There has been some confusion about whether the formation is the Haynesville Shale and/or the Bossier Shale because of different geological naming conventions in Texas and Louisiana. It is generally recognized that the shale interval in East Texas is the Lower Bossier that correlates with the Haynesville of Louisiana. The Upper Bossier Formation is distinguished from the Lower Bossier Formation by its location, to the southwest, and the fact that it is more sand-rich.

Most operators designated the field for wells drilled in the Bossier Shale Formation in Shelby, Panola, and Harrison counties as the Carthage, North (Bossier Shale). However, as the area developed, operators assigned wells to the Beckville (Haynesville) and Waskom (Haynesville) Fields. Hence, the names for Haynesville and Bossier Shale are used interchangeably. On December 15, 2009, the Railroad Commission of Texas issued an order consolidating the existing Haynesville/Bossier field discoveries in this area into the Carthage (Haynesville Shale) field. This consolidation means that wells previously reported to these fields now report all completion and production information under the Carthage (Haynesville Shale). The Carthage (Haynesville Shale) field now represents the majority of the Haynesville/Bossier production in these counties.

Disclaimer: This data is a snapshot in time displaying production data from the RRC’s Production Data Query System (PDQ) based on the extract date.

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