The Houston Exploration bought about 79 Bcfe of Gulf of Mexico gas reserves in two asset packages on Wednesday from an undisclosed company for a total of about $145 million.
“These properties are a great fit with our existing Gulf of Mexico operations,” said CEO William G. Hargett. “They are within our geophysical surveys, produce primarily gas, represent high working interests, offer significant drilling upside, and we will operate most of them. Moreover, we believe the relatively long life of the majority of these assets will add approximately one-half a year to our companywide reserve life index and provide accretion to earnings and cash flow.”
The first package of assets includes 63 Bcfe of proved reserves (81% natural gas) in the shallow waters of the Gulf of Mexico. The purchase price was $113.5 million. Current production from the 12 fields totals 17 MMcfe/d. The package also includes 25,300 gross acres. The company also will operate 85% of the proven reserves and will have an average working interest of 62%.
In addition, the company entered into an agreement to purchase interests in two other offshore fields which have estimated proven reserves of 16 Bcfe and daily production of 5 MMcfe. The purchase price of the second package was $31.5 million. The assets are 85% natural gas and the company will operate 100% of the proven reserves and will have an average working interest of 85%.
Houston Exploration said it plans to fund both transactions with its bank revolver and cash on hand. Houston Exploration expects to have a debt-to-capitalization ratio of 32% following the purchases.
The company also announced that it has entered into additional hedges through 2008 to protect the acquisition economics.
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