XTO to Buy 11% of Williams' U.S. Proved Reserves in $400M Deal
XTO Energy Inc. has entered into a definitive agreement with units of Williams to pay $400 million for some natural gas and coalbed methane (CBM) producing properties located in the Raton Basin of Colorado, Hugoton Field of southwestern Kansas and the San Juan Basin of New Mexico and Colorado. XTO estimates proved reserves to be 311 Bcfe, of which 77% are proved developed.
The acquisition will add about 60 MMcf/d of long-lived gas production to the Fort Worth-based independent's production base. For Williams, the transaction represents 11% of its proved reserves, which totaled 2.8 Tcfe at 2002 year-end. Williams, which received a $40 million deposit from XTO on Wednesday, estimates its pre-tax gain on the property sale will be between $80 million and $100 million.
"These producing properties strengthen our current asset base while adding a new core operating area where we can apply our successful old core competency," added Steffen E. Palko, XTO's president. "Our coalbed methane expertise is expanding into the prolific Raton Basin. We are boosting XTO's existing San Juan Basin operations with new conventional and coal bed methane gas positions. The Hugoton Field properties add a wedge of shallow decline production to support our high-impact drilling program in East Texas. Altogether, the properties offer more development upsides while reducing the company's overall decline rate, a key factor in ensuring predictable future growth."
In the Raton Basin, XTO will acquire 121 Bcfe of proved reserves (66% developed) in Las Animas County, CO. Gas sales from these properties total about 23 MMcf/d (net). Upon closing, XTO will control 100% working interests across 54,317 acres (net) of CBM leasehold, which contains 191 producing wells. The acreage position is contiguous and only 40% developed, allowing for continued development of additional production and reserves.
In the Hugoton Field located in southwestern Kansas, XTO is acquiring 107 Bcfe of proved reserves (98% developed). The properties produce about 24 MMcf/d (net) of natural gas. Upon closing, XTO will gain 109,819 net developed acres, with 341 operated wells and an average working interest of 84%. XTO also is acquiring 83 Bcfe of proved reserves (67% developed) in the San Juan Basin, with assets located in San Juan and Rio Arriba counties of New Mexico and La Plata County of Colorado. These non-operated properties produce about 13 MMcf/d (net) of which about 5 MMcf/d is CBM gas. Leasehold for the company encompasses 15,132 acres (net), and working interests range from 1-68%.
The transaction is scheduled to close by June 6, with an effective date of March 1, 2003 for the Hugoton Field assets and April 1, 2003 for the others. Williams advised XTO that a portion of the San Juan Basin non-operated properties is subject to preferential purchase rights. The final closing price is subject to typical closing and post-closing adjustments. XTO will fund the purchase through equity and long-term debt.
The deal represents a substantial portion of the exploration and production assets Williams has targeted for sale by year-end. Other assets the company is marketing include certain properties in the Denver-Julesberg, Green River and Uinta basins, as well as Gulf Coast properties.
"We identified in February the sale of certain exploration and production properties as a key component of our plan to strengthen our finances," said Steve Malcolm, Williams CEO. "Selling these properties allows the exploration and production group to maintain its high-profile operating positions in the Piceance, San Juan, Powder River and Arkoma basins consistent with Williams' strategy of developing a sizable inventory of low-risk, high-return properties," Malcolm said.
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