The Houston Exploration Co., which plans to focus its efforts in the U.S. onshore, on Thursday reported it has completed the sale of substantially all of the Louisiana portion of its Gulf of Mexico (GOM) assets for $590 million ($530.8 million net). At year-end 2005, the assets, which were sold to a private company, had proved reserves estimated at 186.1 Bcfe.
The Houston-based independent, which announced a strategic shift in its exploration efforts last November, said in April that it would sell the offshore assets (see Daily GPI, April 10; Nov. 9, 2005).
“The closing of this transaction represents a significant step forward in our ongoing efforts to restructure the company as a pure onshore operator,” said CEO William G. Hargett. “Looking ahead, our restructuring efforts will continue to be focused on deploying capital in a manner most beneficial to all Houston Exploration shareholders. To that end, we are pursuing a balanced plan that will include the continued execution of our share repurchase program, the development of our existing assets, the acquisition of additional properties in U.S. onshore basins that meet our strategic, operational and financial criteria, and the repayment of outstanding bank debt.”
By the end of 3Q2006, Houston Exploration expects to pay about $30 million in net profits interest to a predecessor owner of some of the GOM properties. It also expects to unwind existing gas hedges on the assets, which total an equivalent of up to 80,000 MMBtu/d for the rest of 2006. Based on current natural gas prices, the cost to unwind the hedges is estimated to be $10-20 million.
In connection with the sale, the company’s borrowing base under its revolving credit facility was reduced to $500 million from $550 million. Wachovia Securities served as the financial adviser to the company in connection with the transaction.
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