XTO Ups Gas Target with Barnett Shale, Arkoma Basin Purchase
A $200 million purchase of several properties in the Barnett Shale of North Texas and the Arkoma Basin will help Fort Worth-based independent XTO Energy Inc. increase its proved reserves by 154 Bcfe, the company said last week. The sellers were not disclosed.
XTO's internal engineers estimate that 52% of the reserves are proved developed, and initially, they will add about 25 MMcfe/d to its production base. Nearly 99% of the acquired production is natural gas, according to the company. Development costs for the proved undeveloped reserves are estimated at $0.64/Mcf.
"These transactions highlight XTO's entry into the highly prolific Barnett Shale region of North Texas," said CEO Bob R. Simpson. "With years of production data and well assessment, we are now confident in the feasibility of the play. In typical XTO fashion, we have acquired producing properties in the core area of development and plan to expand our position."
In the Barnett Shale, XTO is acquiring 97.6 Bcfe of proved reserves (42% developed) for $120 million. Current daily production from the properties is approximately 15 MMcfe. The company expects "substantial upsides" in its initial 11,000-acre position.
XTO also is expanding its operating presence in the Arkoma Basin with the purchase of 56.3 Bcfe of long-lived proved reserves (70% developed) for $80 million. The properties produce about 10 MMcfe/d.
The sales are expected to close by mid-April. Funding will be provided through the combination of existing credit facilities and cash flow.
Simpson said that with these transactions, XTO's natural gas production for 2004 is targeted to increase 18-20%, up from previous guidance of 16-18%. He added that the company remains "focused on securing more strategic properties through acquisition efforts this year."
With the purchases, XTO plans to allocate $20 million in additional development funds to the new properties, bringing 2004 development expenditures to $520 million. XTO will operate more than 88% of the value of the properties.
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