W&T Offshore Inc. said Thursday it is acquiring stakes in six offshore producing fields in the Gulf of Mexico (GOM) from Shell Offshore Inc. for an estimated $450 million in cash and $50 million in debt.
Five of the properties are in the deepwater GOM: the Tahoe, Southeast Tahoe, Marlin, Dorado and Droshky fields. A sixth field, undisclosed because it is subject to a letter of intent with Shell, is a producing property and associated assets in the shallow waters of the Outer Continental Shelf, W&T said.
Shell's interests in the Marlin and Dorado fields were funded by W&T in escrow pending a waiver or exercise of preferential rights for the two properties by the other stakeholders.
"With the production from these assets currently weighted about 37% toward oil on a volume equivalent basis, we can benefit from today's high oil prices, while the reserves are predominately natural gas, which should provide longer term upside," said W&T CEO Tracy W. Krohn.
Shell's combined net production in the six fields currently is about 68.8 MMcf/d of natural gas and 6,840 b/d of oil, or 18,000 boe/d. Total proved reserves are estimated at 7 million boe and 112.2 Bcf, or 154.3 Bcfe. The reserves, "substantially all of which are proved developed producing," were determined by Netherland, Sewell and Associates Inc. as of Sept. 1, W&T said.
"Our acquisition of Shell's interest in these fields helps us meet our objective of increasing our production and reserves in 2010, as well as lowering our costs per Mcfe and improving our [earnings] margins going forward," said Krohn. "Additionally, we believe that the high level of cash flow generated by these properties, partially due to lease operating expenses that are low relative to volumes produced, will provide an attractive return on investment based on full cycle economics."
©Copyright 2010 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.