What was non-strategic to Union Pacific Resources (UPR) provedto be a good fit with core business for Enron Oil and Gas (EOG).UPR sold its 19% non-operated working interest in the MatagordaIsland Block 623 Field and surrounding blocks to Enron Oil and Gasfor $158 million. The deal will close Aug. 31 with an effectivedate of June 1.
“The Matagorda sale is an important step in our previouslyannounced de-leveraging program,” said UPR CEO Jack L. Messman. “Itis an example of our ability to obtain full value for an asset thatno longer falls under our definition of a core business property.UPR’s de-leveraging program continues to unfold, and activenegotiations with prospective buyers are underway for other assetsthat no longer fit our strategic vision.”
UPR’s acquisition of Norcen Energy Resources Ltd. earlier thisyear included extensive interests in both shallow and deep-waterfields in the Gulf of Mexico, in addition to major operations inwestern Canada and Latin America. Most of the newly acquired Gulffields, along with UPR’s existing offshore operations, are in theCentral Gulf. Non-operated fields on the Texas Gulf of Mexico Shelfnow lie outside the company’s area of concentration.
UPR closed on the $2.6 billion acquisition of Norcen Energy inMarch, increasing its production foothold in Western Canada, LatinAmerica and the Gulf of Mexico, including some deep-waterprospects. “While we currently have a presence in Canada and theGulf of Mexico, this acquisition will make us a significant playerin these regions,” said George Lindahl III, UPR president (See NGIFeb. 2).
“The purchase of an interest in Matagorda 623 demonstrates EOG’songoing commitment to natural gas, which currently accounts for 85%of our reserve base,” said Forrest E. Hoglund, EOG CEO. “Thefield’s location in the western Gulf of Mexico is a strategic fitto our core holdings in the Matagorda offshore area and strengthensEOG’s position as a significant producer in the western Gulf ofMexico.”
EOG also announced the recent completion of a second well inits onshore acreage in Matagorda County, TX, in which the companyholds a 100% working interest. The Savage No. 3 commenced saleslast week and is producing 40 MMcf/d of gas and 4.8 thousandbarrels per day of condensate. The adjacent Savage No. 1 discoveryannounced in mid-July is flowing at 39 MMcf/d and 3.8 thousandbarrels/d of condensate.
UPR said it expects to record an after-tax gain of $85 millionfrom the sale in the third quarter. The Matagorda sale is the firstof a series of asset sales it plans to announce in coming months asthe result of the de-leveraging program.
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