Moving forward with a plan to shift its focus from the Gulf of Mexico (GOM) to onshore oil assets, Plains Exploration & Production Co. (PXP) has agreed to acquire from multiple sellers interests in about 60,000 net acres in the Eagle Ford Shale in South Texas for $578 million in cash, the Houston-based independent said Tuesday.
The property has net resource potential of approximately 140-175 million boe, projected net production capability of approximately 2,000 boe/d and a year-end 2011 production target exit rate of approximately 5,000 boe/d net to PXP.
About 20,400 net acres of the acquisition are located in a joint operating area between PXP and EOG Resources Inc.
Houston American Energy Corp. said it is selling to PXP a 2.5% working interest in more than 6,000 gross acres in Karnes County, TX, for $1.65 million as part of the larger PXP acquisition. Houston American said the deal allows it to retain an overriding royalty interest in the acreage.
The Eagle Ford acquisition is expected to close by the end of the year with an effective date of Sept. 1, 2010, PXP said.
"The Eagle Ford transaction adds a high-quality oil asset with substantial reserve and oil production growth opportunities to PXP's existing domestic oil resource position," said PXP CEO James C. Flores. "As part of our focused oil growth strategy, PXP will operate substantially all of its oil assets, maintain total company liquids volumes between 50-60% of total production and continue to deploy a hedge strategy to protect our cash flows."
PXP had been considering the deal for about a year, Flores said during a conference call with analysts Tuesday.
In August PXP said it hoped to raise $1-2 billion from its Gulf of Mexico (GOM) properties either through third-party joint ventures or through asset sales "to align capital spending with operating cash flow" (see Daily GPI, Aug. 6). Last month PXP said it was selling gas-weighted assets in the shallow waters of the GOM to McMoRan Exploration Co. in a deal estimated to be worth more than $800 million, and said it had begun the process of marketing its deepwater GOM portfolio (see Daily GPI, Sept. 21). Final bids in the deepwater GOM divestment are expected by mid-November and the divestment should be closed by the end of the year, PXP said.