Houston-based Newfield Exploration Co., which up to now has been heavily concentrated on finding natural gas, on Friday announced an agreement to acquire oil-rich Inland Resources, a privately held Denver-based exploration company. The transaction, valued at $575 million plus working capital and inventory, establishes a new Rocky Mountain focus for Newfield and adds a legacy asset to its portfolio.

Inland’s major asset is the 110,000-acre Monument Butte Field, located in the Uinta Basin of northeast Utah. Inland operates the field and has an average working interest of about 80%.

Through the transaction, Newfield will acquire an internally estimated 326 Bcfe of proved reserves and 439 Bcfe of probable reserves. The reserves are 85% oil and are 70% proved undeveloped. Newfield estimates that the field has more than 2 million bbl of oil in place.

“This transaction adds a new dimension to Newfield’s portfolio — long-lived reserves with an increasing production profile,” said CEO David A. Trice. “The Monument Butte Field is an under-exploited legacy asset. It offers the opportunity for a well financed, technically driven company like us to drill hundreds of wells and to apply current and future technology to grow production for the next 10 years. This acquisition places Newfield on the map in the Rockies, an area in which we intend to grow in the future.”

Trice said, “the current market for long-lived natural gas reserves is intensely competitive. In our opinion, better values are available in crude oil assets. This is particularly true in view of the futures market for crude oil, which continues to exceed expectations and offers opportunities to assure historically high future prices through appropriately structured hedging transactions.”

Current net production is approximately 7,000 boe/d, and Newfield expects to double production by the end of 2006. Production is expected to be 10,500 boe/d in 2005 and 14,000 boe/d in 2006. Three rigs are currently drilling in the field.

Pro forma for the acquisition, Newfield’s proved reserves will be approximately 1.7 Tcfe, of which 77% will be proved developed and 70% will be natural gas. The transaction will lengthen Newfield’s reserve life by nearly 20%, to approximately seven years. Newfield expects its 2004 production to be 240-250 Bcfe, an increase of 9-13% over 2003. In anticipation of the closing of this transaction, Newfield hedged approximately 4,000 boe/d from 2005-07.

Newfield intends to finance the transaction with a combination of debt and equity, and it expects the transaction to be accretive to cash flow from operations and earnings in 2005 and beyond. Subject to customary closing conditions, the transaction is expected to close in late August or early September.

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