Questar Corp.'s exploration and production (E&P) subsidiary is buying two natural gas development properties in Northwest Louisiana for $655 million that will allow the producer to bulk up the company's Midcontinent business.
The properties, to be purchased from multiple sellers, are located in Red River and Bienville parishes, about 10 miles south and east of the company's existing operations in the Elm Grove Field.
Questar E&P estimated the assets would add 276 Bcfe of net proved reserves as of the effective date, Jan. 1, with 20% of them currently proved developed. Proved plus probable and possible reserves are estimated at 593 Bcfe. In addition to 74 existing producing wells, another 852 future development well locations on a combination of 20-acre and 40-acre density have been identified.
Development targets are the same as those being successfully exploited by Questar E&P at the Elm Grove Field -- multiple stacked tight-gas sands in the Cotton Valley and Hosston formations at depths ranging from 6,500 to 10,500 feet. Gross reserves attributable to future vertical wells are expected to range from 0.7 Bcfe to more than 3.25 Bcfe; gross completed vertical well costs are estimated to range from $1.7 million to $2.4 million.
"We're turning up our Midcontinent growth with these bolt-on acquisitions in our core northwest Louisiana Cotton Valley/Hosston play," said CEO Keith Rattie. "We're putting more assets in the hands of our experienced Midcontinent team -- and diversifying our E&P business."
Charles Stanley, CEO of the company's E&P business, said, "If we execute, with these assets, Questar E&P may double Midcontinent production over the next four to five years. Combined with our existing inventory in Elm Grove Field, Questar E&P will have over 1,050 Cotton Valley/Hosston development locations in northwest Louisiana, over 950 of which will be Questar E&P-operated -- and that assumes vertical wells. We're intrigued by the potential to significantly increase rate, recoveries and returns with horizontal drilling on parts of this acreage. We'll be evaluating that alternative over the next couple of years."
If the transactions close at the end of February as expected, the company estimated the assets could yield incremental production of 12 Bcfe net to Questar E&P in 2008. The acquisition is expected to be funded with a combination of short- and long-term debt.
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