NGI The Weekly Gas Market Report / NGI All News Access

Questar Buys HS Resources E&P Unit for $157.5 M

Questar Buys HS Resources E&P Unit for $157.5 M

Questar Corp. subsidiary Universal Resources will increase its daily gas and oil production 20% and reserves 31% with a $157.5 million acquisition of HSRTW Inc., a Midcontinent region exploration and production subsidiary of HS Resources of San Francisco.

In the cash transaction announced last week, Universal will receive 150 Bcfe of proved oil and gas reserves (80% gas) primarily in Oklahoma, as well as Texas, Arkansas and Louisiana. It also receives another 50 Bcfe of reserves considered probable and possible. The properties include 1,000 wells in the Anadarko and Arkoma basins.

Universal Resources CEO Gary L. Nordloh said the acquisition is accretive to earnings in the amount of $1.5 to $2 million in 1998. He said the $157.5 million purchase price includes $155 million for the reserves and other assets of the company, and $2.5 million for working capital. The amortization rate for the new acquisition is $0.94/Mcfe.

The newly acquired properties have current average daily production rates of 32 MMcf of gas and 870 bbl of oil. Nordloh said future production is hedged for 11 to 18 months under contracts with an average price of $2.30/Mcf for gas and $17.75/bbl of oil. First half production from the properties was 6,725 MMcfe, which generated $8.2 million net of related operating expenses and overhead, HS said.

"Through the value derived from our Mid-Continent activities, we have already realized approximately $126 million in proceeds from production and previous divestitures, less approximately $33 million for cumulative capital expenditures and overhead. Moreover, we are retaining ownership of HS Energy Services, which has contributed more than $4.3 million of pre-tax net operating income since the acquisition in mid-1996. When the proceeds from this divestiture are accounted for, it should be clear that our work in the Mid-Continent created important value for our shareholders," said HS Resources President Mike Highum. The transaction is scheduled to close and be effective Sept. 1.

Rocco Canonica

©Copyright 1998 Intelligence Press, Inc. All rights reserved. The preceding news report may not be republished or redistributed in whole or in part without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus