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Woodside Energy Raises Gulf Production Stake with $297M Gryphon Acquisition

Australian exploration and production giant Woodside Petroleum Ltd. said late last week that its U.S. production arm expanded its offshore interests in the Gulf of Mexico by acquiring Houston-based Gryphon Exploration Co., a joint venture between Cheniere Energy Inc. and Warburg Pincus.

Woodside said it paid US$282.7 million to acquire Gryphon, a private upstream oil and gas company with exploration and production interests in the Gulf. After taking into account Gryphon's net debt, the total acquisition cost was US$296.9 million. Woodside said the transaction is immediately accretive to earnings and operating cash flow.

Woodside CEO Don Voelte said the acquisition builds on the company's existing Gulf of Mexico interests, giving it a diverse portfolio across the shelf and deepwater Gulf. "This delivers Woodside a significant expansion of our exploration portfolio in the Gulf and also provides us existing production," he said. "It capitalizes on the alliance we formed with Explore Enterprises earlier this year and builds Woodside's position in a region we have identified as a core area of interest."

Currently, Gryphon has interests in 118 leases in the Gulf, 95 of which are operated by the company. The majority of the leases are on the continental shelf. Woodside said the acquisition brings it immediate production from 15 fields, 11 of which are operated by Gryphon. The fields are producing 30 MMcfe/d. A further six fields under development could double production by the end of this year.

As of June 30, independent petroleum consultants Ryder Scott estimated Gryphon's proved reserves to be 72.5 Bcfe. Proved plus probable reserves are estimated to be 114 Bcfe. These reserves are made up of at least 85% natural gas.

Woodside said it has hedged gas production from Gryphon at average annual prices of $10.04, $9.01 and $8.39 per MMBtu for the years 2006, 2007 and 2008, respectively. These hedges, in addition to Gryphon's existing hedges, represent about 50% of expected production to the end of 2008 and underpin about half the acquisition cost.

The company said it has identified 15 high-quality prospects from Gryphon's exploration portfolio, with exposure to net risked volumes of 83 Bcfe. At least four of these prospects are being, or will be, drilled by the end of the year. An additional 65 prospects in Gryphon's portfolio are being evaluated.

Houston-based Cheniere Energy said the sale generated the company net proceeds of $20.2 million. Gryphon Exploration was formed in October 2000 by Cheniere Energy and Warburg Pincus, a global private equity firm based in New York, to fund Cheniere's exploration program in the Offshore Louisiana Area. Cheniere Energy contributed all project related assets to Gryphon Exploration Co. and Warburg Pincus made investments of $85 million.

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