Taking advantage of high commodity prices to bulk up its proved oil and natural gas reserves, Plains Exploration & Production Co. (PXP) has entered into an agreement to acquire 106 Bcfe of proved reserves and 70 Bcfe of unproved resource potential in South Texas from a private company for $335 million.
The deal, which covers 67,929 gross acres (34,509 net acres) in South Texas, will be funded primarily with proceeds from recently completed divestments through the use of a tax-deferred like-kind exchange, PXP said. The properties currently produce approximately 33 MMcfe/d net to PXP.
“Due to the company’s superior financial position from high cash flow due to record commodity prices, we are opportunistically acquiring excellent production/development assets in South Texas to expand this strong operating area for PXP,” said CEO James C. Flores. “The company’s per-share growth strategy remains focused on acquiring significant and growing production/development assets, executing successful and impactful exploration drilling and repurchasing PXP’s common shares consistently.”
The company noted that the transaction is effective as of Jan. 1, 2008 and is expected to close during the second quarter subject to customary closing conditions and purchase price adjustments. Jefferies Randall & Dewey acted as advisor to PXP on the transaction.
As a result of the acquisition, PXP increased its 2008 full-year average sales volume range to 92,000 Boe/d-96,000 Boe/d. The expected current tax for 2008 has been reduced to a range of $40 million to $115 million due to the tax-deferred like-kind exchange. The company said it will provide updated 2008 full-year financial and operating guidance after the acquisition is closed.
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