Cross Timbers Still Growing Arkoma Presence
Cross Timbers Oil Co. of Fort Worth, TX, continues to grow its
presence in the Arkoma Basin with an acquisition from Houston-based
Ocean Energy Inc. Ocean Energy agreed to sell its working interest
in certain properties in the Arkoma Basin in Arkansas and Oklahoma
to Cross Timbers for about $235.3 million, which will be used to
reduce debt. The transaction, which is subject to customary closing
conditions, is scheduled to close by mid-September.
Including its acquisition of Spring Holding Co. with Lehman
Brothers Holdings, which was completed July 2, Cross Timbers will
have about 2,540 gas wells in the Arkoma Basin, said spokesman
Preston Kirk. About 2,140 of the wells are in Arkansas; about 60 to
70 are in the Texas Panhandle, and the balance are in Oklahoma,
Kirk said. The properties offer about 1,000 drilling opportunities,
which is a three- to four-year inventory. Both the Ocean Energy and
Spring Holding properties have a reserve-to-production index of 11
Cross Timbers announced the 50% acquisition of Spring Holding Co.,
a private Tulsa, OK-based oil and gas producer, for $42.5 million in
May (See Daily GPI May 19, 1999). The
deal included about 1,400 producing wells on 340,000 net acres,
primarily in the Arkoma Basin. It currently operates wells
representing 85% of the reserve value and has estimated proved
reserves of 264 Bcfe, of which 99% is natural gas. Proved developed
reserves account for 82% of total proved reserves. The company
produced 66 MMcf/d in the first quarter of 1999.
Before the Spring Holding deal, Cross Timbers was about 70% gas.
That increased to 80% after the Spring deal. Now with the Ocean
Energy properties the company is about 90% gas. Around the first of
the year, Cross Timbers announced a capital and exploration budget
of between $60 and $70 million. That has since been increased to
$70 to $90 million.
Ocean Energy plans to cancel its recently announced royalty
trust offering. A portion of the underlying properties dedicated to
the royalty trust consists of the Arkoma properties for sale.
"Given our previous intentions in regards to the Royalty Trust,
we had identified these assets for monetization several months ago.
However, it has become clear since we made our filing with the SEC
that the more efficient means of monetization is now an outright
sale," said James T. Hackett, CEO. "At the time of the merger in
late March, one of our self-imposed goals was to achieve a
long-term debt to book capitalization ratio of 55% within 18 months
of closing. With this transaction, we now anticipate achieving the
substantial portion of this objective by the end of 1999. While we
will remain diligent in terms of our financial prudence going
forward, this transaction also marks the completion of the
aggressive asset rationalization program that we have pursued over
the course of the past four months. Consequently, we can now
dedicate our attention to the challenges of the future as we embark
on the growth portion of our strategy."
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