W&T Offshore Inc. agreed Tuesday to spend $228 million to acquire all of Newfield Exploration Co.'s remaining Gulf of Mexico (GOM) properties, which include 65 deepwater blocks. The 78-block inventory covers more than 430,000 gross acres.

Most of the blocks (65) are in the deepwater, with six wells now in production. Ten blocks are on the Outer Continental Shelf with four producing wells. W&T also would capture an overriding royalty interest in three deepwater blocks, two of which are producing.

"This acquisition will substantially increase our current production, provide numerous development and exploration opportunities in the deepwater Gulf of Mexico, as well as significantly expand our deepwater acreage holdings," said W&T CEO Tracy W. Krohn.

Average production from the properties in July was 8,350 boe/d net, about 63% weighted to natural gas and 37% to oil. July output was 75% from deepwater. Houston-based W&T would take over operations of about 90% of the production.

The producing deepwater blocks are in the Garden Banks, Mississippi Canyon and Viosca Knoll areas. Producing conventional shelf leases are in Ship Shoal, West Cameron, Vermillion and West Delta. Total undeveloped acreage is estimated at 312,000 gross acres, 91% of which is in the deepwater. Estimated proved and probable reserves total 7.7 million boe and 1.2 million boe, respectively.

The transaction, expected to close in early October, has an effective date of July 1, 2012. W&T plans to use a combination of cash on hand and debt to fund the acquisition.

The sale closes the door on Newfield's GOM business. The Woodlands, TX-based producer, which at one time captured about 10% of its total output from the GOM, began to defer its U.S. offshore spending in 2010 to expand in the U.S. onshore (see Daily GPI, Nov. 17, 2010). In 2011 the company produced a total of 28.1 Bcfe pro forma in the GOM, which included 2.1 Bcfe from assets that were sold last year.

Including the agreement with W&T and sales in 2011 and early this year, Newfield's total asset sales from the GOM generated about $300 million, said CEO Lee K. Boothby.

"This is another positive step along our path of better aligning our people and capital investments on our plays of the future," said Boothby. "Our focus today is on driving strong oil and liquids growth and increasing cash flow from our core assets onshore U.S. and in Southeast Asia."

©Copyright 2012 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.