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Titan Exits Gulf of Mexico, Louisiana

Titan Exits Gulf of Mexico, Louisiana

Independent producer Titan Exploration Inc. announced Monday it has agreed to sell all of its Gulf of Mexico assets to Coastal Oil & Gas for $71.3 million in cash plus overriding royalty interests in certain properties. The deal, which is expected to close May 18th, comes on the heels of the completion of the sale of its Louisiana onshore properties to Phoenix Oil and Gas Ltd. for $5.4 million in cash.

Although only 25 Bcf of equivalent proved reserves were associated with the Gulf of Mexico properties, the sale attracted widespread interest among producers because it included a major discovery that Titan made last November, said William White, Titan's vice president of finance.

"The fact is Coastal and everybody else who was interested in this package made a substantial bid for the discovery well, which has no proved reserves booked to it but which has a [gross] potential for 340 Bcf of gas," he noted. The multi-well discovery project, of which Titan is 50% owner and operator, "is what attracted all the attention, and [was] the principal reason behind the large sale price."

Despite the project's potential, Titan kept to its original decision - which was made prior to last November - to exit the Gulf of Mexico. "Our Gulf of Mexico presence is small relative to Titan's overall reserve size. Titan has almost 500 Bcfe of total proven reserves, but the proven reserves out in the Gulf of Mexico accounted for only 2-3% of that number. It just didn't warrant our attention," White said.

In a separate deal, the producer closed on the sale of a handful of wells in northern Louisiana with about 7 Bcfe of proved reserves to Phoenix Oil on April 29th. Titan noted the properties also accounted for only a small portion of its overall reserve portfolio.

"We're trying to remain focused in areas where we can justify [maintaining] offices," such as the Texas gulf coast region and the Permian Basin of West Texas and Southeast New Mexico, White said. At the same time, "we are always looking at [new] opportunities. Titan is financially pretty strong. Last year we cash flowed about $32 million. We produced right at 7 million barrels of oil equivalent or 41 Bcf equivalent. This year we're going to produce about the same amount given our current base. We don't have much debt, and we're actively pursuing acquisition opportunities."

Titan Chairman Jack Hightower said the company will use the sale proceeds to pay down its debt and to pursue additional acquisition opportunities this year and next. Titan already has looked at a "number of deals" in the Rockies, MidContinent, South Louisiana and Mississippi, but "we haven't seen anything yet that met our objective," White noted.

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