Occidental Petroleum Corp. (Oxy) agreed to acquire the interest it didn’t already own in some Permian and Piceance basin fields from Plains Exploration and Production Co. (PXP) for $1.29 billion. The transaction frees up cash that would allow PXP to develop its joint venture with Chesapeake Energy Corp. in the Haynesville Shale.
The Oxy agreement, which is expected to close by the end of the year, follows transactions announced late last year in which Oxy paid PXP $1.55 billion for half stakes in the West Texas and Colorado plays (see Daily GPI, Dec. 18, 2007). The Permian and Piceance assets currently have net production of around 52 MMcf/d of gas and 4,300 bbl of liquids, or 13,000 boe/d. The properties have about 92 million boe of proved reserves weighted 69% to gas. About 45% of the properties are developed.
In the first six months of this year Oxy produced more than 50 MMcf/d in the Piceance Basin. The Los Angeles-based producer said that with the PXP purchase Thursday, its gas output would grow to at least 200 MMcf/d by 2010. Oxy’s net acreage position in the Piceance Basin now totals 129,000 acres.
The transaction would reduce PXP’s debt by at least $1 billion and allow the Houston-based producer to focus on its stake in the Haynesville Shale. PXP in July agreed to pay more than $3 billion to Chesapeake to purchase a stake in Chesapeake’s holdings in the emerging gas play, which included 110,000 net acres and the right to a 20% stake in additional leasehold (see Daily GPI, July 2).
“The Haynesville Shale will become a key driver to our production and reserve growth for most of the next decade while bolstering our return on investment,” PXP CEO James Flores said. The Oxy deal, he said, would allow PXP to reduce its projected 2009 capital spending to $1.35 billion “plus have a pro forma target compounded annual production growth rate in excess of 15% for 2008-2012.”
PXP plans to update full-year 2008 operating and financial guidance and provide full-year 2009 guidance on Nov. 6, when 3Q2008 earnings are scheduled to be released.
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