Santa Fe Snyder Buys into Shell's Gulf Arsenal
Santa Fe Snyder, the resultant company from the recently
approved Santa Fe Energy Resources and Snyder Oil Corp. merger,
bought $210 million of interest in four Shell Exploration &
Production Co. (SEPCo) Gulf of Mexico (GOM) assets. Closing is
expected in August. Monday's deal, which would give Santa Fe Snyder
access to production from the Macaroni, Troika and Brutus
deep-water fields as well as the Angus Complex, is expected to add
14.5 MMcf/d and 11,500 b/d of oil to the new company's production
results in 2000.
SEPCo will remain the operator and continues to maintain a
majority working interest in each of the assets. Santa Fe Snyder's
working interests will range from 15% to 49%. The fields are in
water depths of 1,400 to 3,700 feet. The Macaroni, Angus and Brutus
areas are still in development. The reported transaction value
includes Santa Fe Snyder's share of the cost to bring the fields on
production in 1999.
These assets are considered main pillars in Shell's Gulf of
Mexico strategy (See Daily GPI, April 9, 1999). The $900 million
Brutus project, 165 miles Southwest of New Orleans on Green Canyon
block 158, is expected to produce 100,000 Boe/d and 150 MMcf/d when
it comes on line in 2001. Like the Brutus project, the $200 million
Angus facility, with a drilling depth of 2,000 feet, is in the
Green Canyon area of the GOM. The $270 million Macaroni project is
225 miles southwest of New Orleans in the Garden Banks area of the
"This transaction offers substantial upside exploration and
continuing development potential in the Gulf of Mexico and will
make a significant contribution to our production, reserves, cash
flow and earnings per share," said Santa Fe Snyder CEO James Payne.
The company expects to finance the SEPCo transaction with a
combination of equity and a forward sale of crude oil production.
Goldman, Sachs & Co. and Credit Suisse First Boston Corp. will
manage the equity offering.
The additions come on the heels of other bullish production news
for the merged company. Natural gas production increased 53% to 281
MMcf/d during the second quarter of 1999 from 183 MMcf/d in the
second quarter of 1998, fueled principally from Snyder Oil's
predominate domestic gas production. Domestic production in the
second quarter was 64% natural gas and 36% oil.
"With the further cost savings expected in the second half of
the year and the recent improvement in commodity prices, we have
positioned the company to take advantage of the changes now
occurring within the industry," Payne said. "We exited June
producing 48,000 barrels of oil and 320 MMcf/d, both above our plan
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