Kerr-McGee Corp. on Wednesday announced it is selling some of its domestic oil and natural gas assets to Encore Acquisition Co. for $104 million in cash. The properties are located in the Permian Basin of West Texas and Anadarko Basin of Oklahoma, and the sale is expected to close in November.
The fields are part of Kerr-McGee's previously announced plan to divest selected lower-growth properties. Net proceeds, estimated at $69 million, will be used to reduce the company's debt.
The properties to be sold are located in the Levelland-Slaughter, Howard Glasscock, Nolley-McFarland and Hutex fields in West Texas and the Oakdale, Calumet and Rush Springs fields in western Oklahoma. The properties currently are producing 1,300 boe/d; about 94% is crude oil.
Encore's internal engineers have estimated total proved reserves to be 6.2 million boe, with 69% proved developed producing. The properties have a reserves-to-production ratio of nine years. Lease operating costs are $13.73/boe. Encore has identified 1.9 million boe of proved undeveloped opportunities on these properties with total capital requirements of approximately $12 million. The capital targets reserves through infill drilling and down-spacing in existing fields. Encore plans to finance the acquisition with internally generated cash flow and by drawing down its bank facility.
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