Constellation Energy Partners LLC (CEP) continued to expand its coalbed methane holdings in the Cherokee Basin of Oklahoma with the planned acquisition of Newfield Exploration Oil & Gas Properties, a subsidiary of Houston-based Newfield Exploration Co., for $128 million, the companies said Friday.

Newfield will sell all of its coalbed methane assets in the Cherokee Basin, including 650 producing wells, interests in approximately 80,000 net acres and a gas gathering system. The acquisition is subject to customary conditions and is expected to close in the third quarter.

The Newfield acquisition is the second Cherokee Basin deal for CEP in recent weeks. CEP closed the $240 million acquisition of AMVEST Osage Inc., a subsidiary of privately held AMVEST Corp., in July. Those properties’ estimated proved reserves are 93 Bcfe; current net production is 16 MMcfe/d, and the assets have an estimated reserve life of 16 years. According to CEP, the AMVEST deal included 370 producing wells with generally a 100% working interest, and more than 1,000 additional drilling and recompletion opportunities. Net production from the AMVEST properties in the first year is estimated at 6.5-7 Bcfe and in the second year it is 8-9 Bcfe.

In April CEP completed another Cherokee Basin deal, acquiring coalbed methane properties and more than 500 miles of pipeline gathering systems from EnergyQuest Resources LP for $115 million.

Baltimore-based Constellation Energy formed CEP in 2006 and is the majority owner (see NGI, Aug. 14, 2006). Most of CEP’s gas holdings have been in Alabama’s Black Warrior Basin.

Newfield’s production guidance, issued July 25, accounted for the CEP deal and other anticipated divestitures and remains 240-253 Bcfe in 2007 and 215-230 Bcfe in 2008. In June, Newfield agreed to sell all of its natural gas-heavy properties in the shallow waters of the Gulf of Mexico to McMoRan Exploration Co. for $1.1 billion (see NGI, June 25). The company said it made that deal to pay down debt and finance its $575 million acquisition of Stone Energy Corp.’s Rocky Mountain assets, which was announced in May (see NGI, May 21). Newfield has also said it intends to sell assets in the UK North Sea and Bohai Bay, China.

Newfield entered the Cherokee Basin area through the purchase of assets from two private companies in 2004.

In July Newfield reported a 60% increase in income and a 17% jump in its U.S. gas volumes. In the second quarter the company reported $150 million in net profits, record production at its Woodford Shale, Texas Wash, Val Verde and South Texas assets and brought on new production at the Wrigly, Grove and Abu developments. Friedman, Billings, Ramsey & Co. Inc. analysts noted that Newfield hit its production guidance “for the first time in a while,” and “is beginning to climb out of the penalty box the market put it in after the 1Q2007 earnings release” (see NGI, July 30).

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