Continuing to increase its stake in the growing production region of Oklahoma and Arkansas known as the Arkoma Basin, Radnor, PA-based Penn Virginia Corp. closed a land acquisition for $47.9 million in eastern Oklahoma primarily targeting Hartshorne coalbed methane (CBM), with upside potential in the Woodford and Caney shales, the company said. The deal marks Penn Virginia's second Arkoma acreage acquisition in a little more than a year.

The company estimates the newly acquired properties' proved reserves are 18.8 Bcfe, with 14.8 Bcfe of probable and possible reserves. Current net production is approximately 3.1 MMcfe/d. The 22,700 gross (15,800 net) acres are adjacent to Penn Virginia's Riverbend horizontal Hartshorne CBM project in McIntosh and Hughes counties, OK, with approximately 80 potential CBM locations.

Potential upsides listed by the company include reserves associated with the Woodford and Caney shales (approximately 13,700 prospective net acres), shallow conventional reservoirs, and downspaced horizontal Hartshorne CBM drilling. The acquisition was funded with cash on hand and borrowings under the company's revolving credit facility.

"Located adjacent to our existing Riverbend project, this acquisition has attractive transaction economics and provides us with additional exposure to potential upside opportunities," said CEO A. James Dearlove. "The acquisition is consistent with our growth strategy and also supports our belief that the Midcontinent region contains numerous attractive expansion opportunities."

Last summer, Penn Virginia closed its acquisition of privately held producer Crow Creek Holding Corp. in a cash transaction for $71.5 million. Crow Creek's operations (total net proved reserves of about 42.7 Bcfe) were primarily in the Oklahoma portions of the Arkoma and Anadarko Basins.

The Arkoma Basin has become a "tale of two shales" -- it's not quite the best of times yet, but it's certainly not the worst. By 2010, natural gas volumes from the Fayetteville and Woodford shales may approach 970 MMcfe/d, a significant jump from this year's expectation of 469 MMcfe/d, according to a recent report by energy consultant Wood Mackenzie (see NGI, Aug. 20).

Penn Virginia is an independent natural gas and oil company focused on the exploration, acquisition, development and production of reserves in onshore regions of the U.S. The company is active in the Appalachian Basin, the Cotton Valley play in East Texas, the Selma Chalk play in Mississippi and the Gulf Coast of Louisiana and Texas.

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