After turning down a purchase offer from a large company for a majority stake in more than 100,000 prospective Utica shale acres, upstream master limited partnership EV Energy Partners (EVEP) is finding that many of the buyers in the market have more of an appetite for smaller deals.

EVEP has been marketing 103,800 acres in the Ohio portion of the Utica shale spanning black oil, light oil, wet gas and dry gas zones. But the company recently turned down an offer from a large prospective buyer, citing unacceptable deal terms.

“We know the Utica,” said executive chairman John Walker at the Independent Petroleum Association of America’s Oil and Gas Investment Symposium in New York on Tuesday. “We know that it is increasing in value in the wet gas window, and we know what reasonable market terms and prices should be – we’re not unreasonable in terms of expectation.”

Walker said the cash price offered by the large company, which was seeking an 85% interest in the Utica acreage, was acceptable, but other deal terms were not. “It becomes a situation where you are in partnership with someone for a very long period of time,” he said. “We’re not going to create a liability for ourselves.”

Though EVEP is still in discussions with the large buyer, its data room is open to other companies, as well. “We initiated discussions with other entities on smaller packages,” Walker said. The company had initially offered the acreage in four packages, but has since broken it down on a county-by-county basis, meaning that it is being sold off in 13 separate pieces.

These smaller packages have attracted buyers that might not otherwise have been interested. “By repackaging county-by-county, some of the counties might be worth $200-$300 million, and we’re bringing in a whole new level of participants,” Walker said. He added that some companies are interested in more than one county.

“Some of the large folks that originally seemed more interested in a big position are now actually interested in county-type positions,” said chief financial officer Michael Mercer. “They’re looking to add on to positions they have already.” Many companies have said that they are always on the lookout for bolt-on asset purchases that complement their existing positions in US onshore plays.

Walker indicated that while EVEP wants to execute a deal, it is not under pressure to accept a sub-optimal offer. “When we are able to reach an acceptable agreement with a party or parties that appreciate a large, high-quality HBP [held-by production] position as much as we do, we will sell it,” he said. “Until that time, we will remain patient, and are participating in wells to enhance our overall position.”

Chesapeake, in contrast, may not be in as strong a negotiating position. The company is also seeking to sell off some of its Utica assets as part of a broader divestment program intended to help it bridge the anticipated gap between cash flow and spending needs this year, and to pay down heavy debt levels.

“Everybody’s aware of Chesapeake’s position,” Walker said. “They might not be as concerned about terms.”

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