With a strategic focus on developing onshore natural gas assets, Houston Exploration Co. Friday announced an agreement to sell substantially all of the Louisiana portion of its Gulf of Mexico assets to a private investor for $590 million in cash. At year-end 2005, the assets held an estimated 186.1 Bcfe of proved reserves.
The company will retain interests in 18 exploration leases in the Louisiana waters. The transaction has an effective date of Jan. 1, 2006 and is expected to close by May 31. Houston Exploration first announced plans to divest its offshore assets last year.
"Today's announcement marks the continued successful execution of the strategic restructuring of our organization," said CEO William G. Hargett. "Transforming a company's asset base and growth strategy is a challenging task, so we have been patient and thorough during our sales process in order to capture the value of these assets. Our resources are now focused onshore, where we believe our core competencies will deliver more stable and predictable production and reserve growth through an active program that includes both drilling and acquisitions."
Before the assets are sold, the producer plans to unwind hedged production volumes of approximately 80,000 MMBtu/d for the period from June through December 2006. Thereafter, the company's remaining 2006 hedged production volumes are expected to total about 170,000 MMBtu/d.
Sales proceeds could be used several ways, the company said: to develop existing assets, acquire additional properties in U.S. onshore basins, repay outstanding bank debt or repurchase shares of the company's common stock. The company has an ongoing $200 million share repurchase program.
To date, the company has completed, or has pending, Gulf of Mexico sales transactions totaling $810 million. At year-end 2005 the total estimated proved reserves associated with these offshore assets were 244.6 Bcfe.
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