PITTSBURGH– Greylock Energy is ramping up its A&D search efforts once again, the private E&P revealed at Hart Energy’s DUG Appalachia Conference & Expo on Aug. 27.
Greylock’s purse strings are open and its contents are earmarked for A&D after disclosing a sale of Wyoming assets from the last few weeks at the energy event.
So what will the company buy with the transaction’s proceeds? Not even President and CEO Kyle Mork is sure.
Mork also divulged the E&P made a foray into the Utica Shale in Pennsylvania.
Greylock retains an average production of 145 MMcfe/d. It's Appalachian Basin assets produce an average of 115 MMcfe/d. Its remaining assets in the Rockies, including a Uinta Basin position, produce 30 MMcfe/d.
Greylock President and CEO Kyle Mork said the company engaged in ground game A&D deals into the Utica to test a thesis.
“The position that we put together was kind of an organic leasing prospect where we thought, ‘Hey, this has a lot of attributes that we think could work from a geology perspective, but also, we can optimize,’” he said.
The premise: “We all drill our best stuff first and so our whole theory was, ‘Hey, if we can get areas where maybe the base productivity of the rock isn't quite as good as true Tier 1, you know, if it's 90% or 85%, but we can put together leases.”
The company has also been acquiring new Utica development areas in Pennsylvania, anchored by about 15,000 net acres acquired during past two years, Mork said.
Ample unleased acreage surrounding an anchor position allows for expansion of the footprint at favorable prices, Mork said.
Mork was reticent to discuss the portions of the Utica Greylock is targeting, but acknowledged initial drilling results had been intriguing and leasing and drilling may continue.
Proceeds
In Greylock’s previously undisclosed Wyoming deal, Mork didn’t reveal the seller but said his company realized a 3.8x ROI.
Mork said proceeds from the transaction will be earmarked for more A&D.
That was not a given for the private equity-backed firm.
“I would say that when you're in my seat and you lead a private equity backed business, you assume that your private equity buddies are going to say, ‘Hey, why don't you send all that cash to us?’”
Mork said so far, sponsor ArcLight Capital Partners is “very much in support of us, at least for the time being, keeping the cash in the business.”
The company retains 110,000 gross acres in the Rockies and 1,100 wells producing a mix of gas, oil and NGLs with access to West Coast gas markets.
Greylock didn’t disclose the sale price but said the acquisition’s proceeds would allow the private E&P to grow through targeted acquisitions. Where exactly Greylock might target deals, Mork was circumspect about.
Mork said the company is “very bullish” on both its remaining positions in the Rockies’ Uinta Basin and Appalachian positions right now. But the company is also basin agnostic, if it understands the rock.
For instance, the company’s 2022 entry into the Rockies “was not a purposeful move.”
Greylock initially acquired 2,370 operated wells—with roughly 1,300 producing—from a public company, along with gathering, oil and salt-water disposal assets.
Greylock went to work, returning 556 wells to production, upping net production by 12% to 50 MMcfe/d and replacing and repairing equipment, among other efforts.
Addressing the session moderator, Mork said, “You and I were talking a little bit about the various rumors, transactions, which we will not talk about here, but there are a lot of rumored transactions in Appalachia and beyond. And I think you know for us, we want to look at—and do usually look at—kind of anything in Appalachia from an acquisition.”
But Mork is also encouraged to have cash on the balance sheet, low leverage and a good debt capacity to be able to “really look and see if there are other acquisitions that make sense.”
When asked what areas might make sense, Mork replied: “There's no big limits.”
Utica north, Utica south
The Utica may still be in play, of course.
The Utica play is gaining momentum in Appalachia after EOG’s $5.6. billion acquisition of Encino Energy this summer. While northeastern Pennsylvania is fairly locked up by large producers, leasehold in southwestern Appalachia is still relatively fragmented, said David Eudey, vice president of Northeast Appalachia for Expand Energy.
Top producers active in the Utica include Ascent Resources, Antero Resources, Gulfport Energy and Infinity Natural Resources.
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