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Houston's UPDA Farming Out Barnett Drilling

Houston-based Universal Property Development and Acquisition Corp. (UPDA) has entered into negotiations with EOG Resources Inc. to farm out the drilling of 13 wells on 2,700 acres it owns in the Barnett Shale in North Texas, UPDA said Tuesday.

Initial negotiations indicate that the transaction will include a royalty retained by UPDA and an upfront cash payment from EOG, according to UPDA.

"In the proposed transaction, EOG will pay us cash for the acreage, pay all of the expenses for drilling, and we will retain an overriding royalty in the production," said UPDA CEO Tim Brink. "We will also retain all of the production from our existing wells on the property. Although the final numbers have not yet been negotiated, this is a no-lose proposition for UPDA."

Natural gas reserves on the property are conservatively estimated at more than 6.5 Bcf, Brink said.

Earlier this month EOG said it was continuing its Fort Worth-area Barnett Shale gas development drilling program in Johnson and Hill counties (see Daily GPI, May 6). With more than 750 remaining drilling locations in Johnson County alone, EOG can remain active in the play for several years, the company said. EOG estimated that its total production from the Barnett Shale gas and combo plays will average approximately 460 MMcfe/d in 2009, increasing to 700 MMcfe/d in 2012, contingent on hydrocarbon prices recovering from current levels.

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