Pogo Producing Co. said it purchased the stock of a private company with about 90 Bcfe of proven West Texas gas reserves for $208 million, including $35 million of assumed debt. The acquisition is expected to be immediately accretive to Pogo’s earnings, cash flow, production and reserves per share, the company said. It expects to finance the acquisition with available cash and bank debt.
The assets currently produce about 16.5 MMcfe/d. Pogo will become the operator of a significant portion of the properties, which cover over 50,000 leasehold acres and include more than 100 wells scheduled to be drilled during 2005 and 2006.
“This transaction continues to highlight Pogo’s efforts to pursue value-creating domestic acquisitions that have considerable drill-bit potential,” said Pogo CEO Paul G. Van Wagenen. “These particular long-lived assets bolster our growing Western United States region and fit well with an ongoing strategy of acquiring high quality North American reserves.”
He said the acquisition features low-risk development drilling, many recompletion opportunities and significant exploratory drilling potential. Pogo believes that the properties contain 100 Bcfe of high quality probable reserves. “Thus, we hope to more than double the current daily production rate from these properties by the end of 2005,” said Van Wagenen.
In conjunction with the purchase, Pogo acquired costless gas price collars covering 10 MMcf/d for 2005 and 2006. It also entered into collars of $6 by $9.25/Mcf for 2005, and $5.75 by $8.27/Mcf for 2006. Pogo also entered into costless crude oil collars covering 5,000 bbl/d for 2005 with collars of $40 by $62.50/bbl.
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