The development of oil and gas resources requires large amount of capital, and the exploration and production industry is constantly raising these funds either through equity or debt offerings. Three companies have recently accessed the capital markets to garner capital for various crude oil or wet gas plays in the onshore United States.
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PDC Energy (Nasdaq:PETD) priced an offering of 6.5 million shares of the company's common stock at $26.50 per share, raising gross proceeds of approximately $172 million.
PDC Energy is active in the Wattenberg Field in Colorado and plans to use some of the funds to finance the purchase of additional acreage here. The company just announced the acquisition of 35,000 net acres of developed and undeveloped acreage in this field for $330.6 million. After the deal closes, the company will have 103,000 net acres under lease and 546 gross drilling locations in this field.
PDC Energy estimates that the average well drilled to the Niobrara on the new acreage will have from 300,000 to 500,000 barrels of oil equivalent (BOE) per well. The production will have a high percentage of oil and liquids in the mix.
SEE: Oil And Gas Industry Primer
Magnum Hunter Resources (NYSE:MHR) headed to the markets recently, raising capital through debt and equity offerings. The company sold 4 million shares of common stock at $4.50 per share, yielding net proceeds of $148.7 million. Magnum Hunter Resources also raised net proceeds of $432.2 million through an offering of senior unsecured notes maturing in 2020.
Magnum Hunter Resources is purchasing oil properties in the Williston Basin from Baytex Energy Corp. (NYSE:BTE) for $311 million and will use the proceeds to help finance this deal. The acquired properties include 50,400 net acres of leasehold with production of 950 BOE per day. The company also plans to use the proceeds to fund an increase in the company's capital budget for 2012.
Northern Oil and Gas (NYSE:NOG) is active exclusively in the Williston Basin and just priced an offering of senior notes, raising approximately $291 million. The company will use the proceeds to pay for development expenses related to its properties and will pay down borrowings on its credit line.
SEE: What Determines Oil Prices?
The Bakken formation in the Williston Basin is the premier onshore oil play in the United States and has attracted a huge amount of interest from the industry over the last few years. This activity has led to a huge jump in oil production in North Dakota, which reported crude oil production of 575,490 barrels of oil per day in March 2012. North Dakota is now producing more crude oil than any other state besides Texas.
GMX Resources (Nasdaq:GMXR) is one of many operators developing properties in the Bakken and recently reported production results on the company's fifth operated Bakken well. The well produced at a peak rate of 1,483 BOE per day.
SEE: A Guide To Investing In Oil Markets
The Bottom Line
The exploration and production industry requires an almost inexhaustible source of capital as the development of oil and gas properties is an expensive endeavor. The good news is that many investors stand ready to provide that financing to the industry, convinced that returns here will be good.
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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.
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