Cross Timbers Picks Up East Texas Properties
Independent Cross Timbers Oil Co. is punching up its exploration
and production plans in East Texas, announcing an agreement to
purchase some of Herd Producing Co.'s gas producing properties in
East Texas and Louisiana for $115 million. The deal includes 500
potential drilling locations, with average gross reserve targets of
3.5 (2.4 net) Bcf, holding a total resource potential of more than
The acquisition would more than double the Fort Worth-based
company's inventory of development areas in its East Texas
Freestone Trend, which includes the Travis Peak, Cotton Valley
Sand, Bossier Sand and Cotton Valley Lime formations.
"These properties directly offset our existing properties and
bridge the gap between our Bald Prairie and Freestone fields," said
Steffen E. Palko, president. "Including these properties, we now
have more than 500 potential locations in the East Texas Freestone
Trend. We expect to drill 220 of these wells during the next two
years with the balance available for future growth."
CEO Bob R. Simpson said the extensive prospects in East Texas
would help Cross Timbers to become the "premier growth company in
the domestic natural gas business."
Closing is set for early 2001. Funding initially will be made
through existing bank lines of credit, which are expected to be
repaid from cash flow in the first six months of 2001. In November,
Cross Timbers sold six million shares of its common stock through
Lehman Brothers Inc., which it said it was using to reduce
outstanding debt by $115 million, the price of the Herd properties.
With the stock sale, the company had expected to reduce debt at the
end of this year to between $755 million and $765 million.
Because of the "multitude of development opportunities" in East
Texas and other existing projects, Cross Timbers has targeted a 20%
growth in total gas production next year, and has increased its
2001 capital budget by $50 million to a total of $250 million.
Cross Timbers said that daily gas production next year should
increase to 535 MMcf, a 60% increase above daily production rates
Banc of America Securities analyst Mark Fischer, who covers
Cross Timbers, expects the company to generate $380 million in cash
flow in 2001. He raised his price target to $30 a share from $29,
and has maintained his recommendation of a "strong buy" for the
Less than a month ago, Cross Timbers' board approved a $200
million exploration and development budget for the coming year, and
said it expected most of the increase to go toward gas production,
then estimated to be 15% higher than this year.
Carolyn Davis, Houston
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