Cross Timbers Oil of Fort Worth, TX has agreed to acquire 270Bcf of gas equivalent reserves and undeveloped acreage in the EastTexas Basin for $265 million from Houston-based EEX Corp. Thecompany estimates the reserves are composed of 260 Bcf of gas and1.6 million barrels of oil concentrated in about 88,000 gross(59,000 net) acres. Current daily production is about 80 MMcfe fromabout 900 (664 net) wells with a reserve-to-production index ofalmost nine years. Proved developed reserves represent 82% of thevalue of the properties. Direct production costs, excludingproduction and severance taxes, average 25 cents/Mcf.

The properties are in East Texas and northwest Louisiana.Production is primarily from the Travis Peak, Cotton Valley andRodessa formations between 7,000 feet and 12,000 feet. Uponclosing, Cross Timbers will operate more than 97% of the value ofthe properties. Included in the acquisition is more than 12,800 netundeveloped acres located primarily in Anderson County, TX.

“This is the right acquisition at the right time,” said CrossTimbers CEO Bob R. Simpson. “It has high-margin production with ageographically concentrated reserve base. Importantly, we expectthis acquisition to increase our cash flow by nearly 50% with anincrease in capitalization of just 20%. Our 1998 exploration anddevelopment budget of $70 million to $90 million will remain thesame, so that excess cash flow will be available for debtreduction.”

Production from the Travis Peak Formation represents about 80%of the acquired production, while the Cotton Valley Grouprepresents about 15%. “Because of their complex, multiple-paycharacteristics, these properties offer numerous developmentdrilling and recompletion opportunities,” said President Steffen E.Palko. “We have already identified more than 100 locations that weplan to drill during the next few years.” The transaction iseffective Jan. 1, 1998, and is anticipated to close in late April.

Joe Fisher, Houston

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