Enron Buys UPR Texas Gulf of Mexico Property
What was non-strategic to Union Pacific Resources (UPR) proved
to be a good fit with core business for Enron Oil and Gas (EOG).
UPR sold its 19% non-operated working interest in the Matagorda
Island Block 623 Field and surrounding blocks to Enron Oil and Gas
for $158 million. The deal is to close today with an effective date
of June 1. The transaction puts UPR closer to its goal, announced
in April, of raising at least $600 million from producing property
sales by the end of the year (See NGI May 4, 1998).
"The Matagorda sale is an important step in our previously
announced de-leveraging program," said UPR CEO Jack L. Messman. "It
is an example of our ability to obtain full value for an asset that
no longer falls under our definition of a core business property.
UPR's de-leveraging program continues to unfold, and active
negotiations with prospective buyers are underway for other assets
that no longer fit our strategic vision."
UPR's acquisition of Norcen Energy Resources Ltd. earlier this
year included extensive interests in both shallow and deep-water
fields in the Gulf of Mexico, in addition to major operations in
western Canada and Latin America. Most of the newly acquired Gulf
fields, along with UPR's existing offshore operations, are in the
Central Gulf. Non-operated fields on the Texas Gulf of Mexico Shelf
now lie outside the company's area of concentration.
UPR closed on the $2.6 billion acquisition of Norcen Energy in
March, increasing its production foothold in western Canada, Latin
America and the Gulf of Mexico, including some deep-water
prospects. "While we currently have a presence in Canada and the
Gulf of Mexico, this acquisition will make us a significant player
in these regions," said George Lindahl III, UPR president (See NGI
"The purchase of an interest in Matagorda 623 demonstrates EOG's
ongoing commitment to natural gas, which currently accounts for 85%
of our reserve base," said Forrest E. Hoglund, EOG CEO. "The
field's location in the western Gulf of Mexico is a strategic fit
to our core holdings in the Matagorda offshore area and strengthens
EOG's position as a significant producer in the western Gulf of
EOG also announced the recent completion of a second well in
its onshore acreage in Matagorda County, TX, in which the company
holds a 100% working interest. The Savage No. 3 commenced sales
last week and is producing 40 MMcf/d of gas and 4.8 thousand
barrels per day of condensate. The adjacent Savage No. 1 discovery
announced in mid-July is flowing at 39 MMcf/d and 3.8 thousand
barrels/d of condensate. "This is an example of EOG's ability to
assess 3D surveys over older fields and develop high-rate fault
blocks with modest levels of reserves," Hoglund said.
UPR said it expects to record an after-tax gain of $85 million
from the sale in the third quarter. The Matagorda sale is the first
of a series of asset sales the company plans to announce in coming
months as the result of the de-leveraging program. UPR spokesman
Daniel Sullivan said he couldn't say exactly when the de-leveraging
program would be completed.
The program is outlined in two phases. Phase one is made up of
five packages of exclusively gas properties. The packages are
offshore, South Louisiana, South Texas, and East Texas (two
packages). Phase two is made up of four packages containing mostly
oil properties. They are Egypt, Australia, Argentina, and the U.S.
Rocky Mountains, which is made up of four gas properties and three
oil properties. Canadian properties in the program are in Alberta
and British Columbia and are mostly gas.
Joe Fisher, Houston