As a hedge against higher natural gas prices, a subsidiary of LSB Industries Inc., an Oklahoma-based chemical and equipment manufacturer, has bought an interest in a package of wells and potential drilling locations in Pennsylvania’s Marcellus Shale.
LSB’s chemical business paid $49 million for a 7.7% average working interest in a leasehold in Wyoming County, PA, that includes interests in 14 proved producing natural gas wells, seven proved non-producing gas wells and 36 proved undeveloped future drilling locations. The company said it expects to spend $38-40 million from the expected cash flows from the producing wells to fully develop its share of the leasehold through 2015.
“Our chemical business considers this acquisition as a hedge against potential natural gas price increases in the future for a portion of our chemical plants’ future natural gas feedstock requirements,” LSB said.
LSB facilities in Alabama and Oklahoma have the capacity to consume more than 12 Bcf of gas annually in the production of nitrogen products, including anhydrous ammonia and urea ammonium nitrate, according to CEO Jack E. Golsen.
“This acquisition includes potential gas reserves equal to approximately 20% of our current annual natural gas requirements over the next eight years at an estimated present value cost of approximately $2.30/Mcf, including development and operating costs,” Golsen said.
LSB manufactures and sells chemical products for the agricultural, mining and industrial markets, as well as commercial and residential climate control products.
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