Readers of this blog are familiar with, among others, two things. 1 – the existence of ZaZa as an operator in one of the core Eagle Ford areas, with the strong probability of being in a JV with a significant unconventional company and 2 – Hess’ reluctance to divulge much meaningful Eagle Ford data despite being in control of > 100k net acres and having spud their first well almost a year ago.
Well ZaZa has, fortunately for us and possibly unfortunately for Hess, clarified the 1 and shed light on the 2.
1 – The existence of ZaZa as an operator in one of the core Eagle Ford areas, with the strong probability of being in a JV with a significant unconventional company
ZaZa confirmed this late last week with the announcement of a merger with Toreador Resources to form one publicly traded company. This, of course, came with many Eagle Ford disclosures. One such disclosure was Hess as their JV partner. ZaZa owns a 10% working interest in a 123k gross acre Eagle Ford position. (12.3k net). See 2 for more disclosures.
2 – Hess’ reluctance to divulge much meaningful Eagle Ford data despite being in control of > 100k net acres and having spud their first well almost a year ago.
Lucky for us, ZaZa played Hess’ hand by providing EUR estimates and a type curve splitting their acreage into an oil and a condensate section.
I find the key terms of the JV to be of particular interest. ZaZa expects the Eagle Ford position to be increased to 160k gross from 123k gross. This raises the question of how much do they expect to spend on this new acreage and who will pay for it? The current market valuation is very high in the Eagle Ford as is shown in this next chart from the ZaZa presentation.
The Hess JV apparently gives ZaZa a 10% fee for all acquired leases and carries the ZaZa 10% working interest to a certain point, I believe at this time that is 200 wells but I could be wrong. This means that Hess is paying 100% WI and giving out a 22-25% royalty, plus a 10% interest to ZaZa, plus some sort of 10% bonus on new acreage.
Do I have a wish list for the next ZaZa presentation? Yes, I do. I would like to know the Hess acreage breakdown, exactly where the acreage blocks are located. I would also like to know if there are terms that force Hess to acquire the additional 37k gross acres, or if that is just wishful ZaZa thinking.
To close this blog out, here is some Drillinginfo data to shed light on the ZaZa (and thus the Hess) program thus far.
There are not many data points at this time. There are good offset data points but those are for ESP clients only.
There are other great parts to the story that I did not have time to touch on in this blog, such as the 100% WI Eaglebine and the fact that ZaZa now is JV’ed with Hess in France as well via the JV with Toreador. I have a feeling there will be a few more blogs on this topic as I begin to further understand what is going on with this JV. Any comments would be appreciated as I was hoping someone on top of this could shed some more light.
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