NGI The Weekly Gas Market Report / NGI All News Access

Enron Buys UPR Texas Gulf of Mexico Property

August 31, 1998
/ Print
| Share More
/ Text Size+

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 Feb. 2).

"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 Mexico."

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

©Copyright 1998 Intelligence Press, Inc. All rights reserved. The preceding news report may not be republished or redistributed in whole or in part without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus