Looking to boost its production output, Occidental Petroleum Corp. said on Thursday that it has acquired an interest in oil and gas production from ExxonMobil in the Permian Basin of West Texas for approximately $972 million.
The company said the production being acquired from ExxonMobil — which is mostly oil — is primarily from the Salt Creek, Sharon Ridge and Dollarhide fields.
Occidental said the closure of the ExxonMobil transaction, combined with another potential transaction (which is being negotiated to acquire additional Permian interests), together with two smaller Permian acquisitions concluded in the first quarter, are expected to result in total proved reserve additions, net of asset sales, of at least 130 million Boe. The company said it expects to sell certain of the acquired assets that do not fit its Permian portfolio.
“Permian Basin made up approximately 30% of our production in the first quarter 2005,” said Lawrence P. Meriage, an Occidental spokesman. “It is an important core area for us. We consider ourselves a natural consolidator. Even prior to this transaction, we were the largest oil producer in Texas.”
Occidental said the recent transactions, which are immediately accretive to earnings and will be financed from cash on hand, are expected to add approximately 26,000 net Boe/d to Occidental’s 2005 production exit rate.
“When combined with our first quarter 2005 production rate of 565,000 equivalent barrels per day,” said CEO Dr. Ray R. Irani, “production from these acquisitions will put us well within reach of the exit rate of 600,000 equivalent barrels, which we announced early this year. Moreover, these transactions further strengthen our industry leading position in the Permian Basin and are consistent with our strategy of focusing on large, long-lived assets in our core geographic areas.”
The company reported that the 2005 depreciation, depletion and amortization rate for the combined properties, net of sales, is expected to be approximately $9 per equivalent barrel. The rate is expected to trend downward in the following years.
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