Santa Fe Snyder, the resultant company from the recentlyapproved Santa Fe Energy Resources and Snyder Oil Corp. merger,bought $210 million of interest in four Shell Exploration &Production Co. (SEPCo) Gulf of Mexico (GOM) assets. Closing isexpected in August. Monday’s deal, which would give Santa Fe Snyderaccess to production from the Macaroni, Troika and Brutusdeep-water fields as well as the Angus Complex, is expected to add14.5 MMcf/d and 11,500 b/d of oil to the new company’s productionresults in 2000.

SEPCo will remain the operator and continues to maintain amajority working interest in each of the assets. Santa Fe Snyder’sworking interests will range from 15% to 49%. The fields are inwater depths of 1,400 to 3,700 feet. The Macaroni, Angus and Brutusareas are still in development. The reported transaction valueincludes Santa Fe Snyder’s share of the cost to bring the fields onproduction in 1999.

These assets are considered main pillars in Shell’s Gulf ofMexico strategy (See Daily GPI, April 9, 1999). The $900 millionBrutus project, 165 miles Southwest of New Orleans on Green Canyonblock 158, is expected to produce 100,000 Boe/d and 150 MMcf/d whenit comes on line in 2001. Like the Brutus project, the $200 millionAngus facility, with a drilling depth of 2,000 feet, is in theGreen Canyon area of the GOM. The $270 million Macaroni project is225 miles southwest of New Orleans in the Garden Banks area of theGulf.

“This transaction offers substantial upside exploration andcontinuing development potential in the Gulf of Mexico and willmake a significant contribution to our production, reserves, cashflow and earnings per share,” said Santa Fe Snyder CEO James Payne.

The company expects to finance the SEPCo transaction with acombination of equity and a forward sale of crude oil production.Goldman, Sachs & Co. and Credit Suisse First Boston Corp. willmanage the equity offering.

The additions come on the heels of other bullish production newsfor the merged company. Natural gas production increased 53% to 281MMcf/d during the second quarter of 1999 from 183 MMcf/d in thesecond quarter of 1998, fueled principally from Snyder Oil’spredominate domestic gas production. Domestic production in thesecond quarter was 64% natural gas and 36% oil.

“With the further cost savings expected in the second half ofthe year and the recent improvement in commodity prices, we havepositioned the company to take advantage of the changes nowoccurring within the industry,” Payne said. “We exited Juneproducing 48,000 barrels of oil and 320 MMcf/d, both above our planlevels.”

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