Grading

El Paso Corp., which has been high-grading its exploration and production (E&P) unit, on Wednesday said its natural gas and oil proved reserves jumped in 2009 by 8% and output reached the high end of company estimates.

El Paso Corp. has completed the sale of some Gulf of Mexico (GOM), onshore and Texas Gulf Coast properties as a part of its portfolio high-grading efforts (see Daily GPI, Jan. 17). In total, El Paso contracted for the sale of an estimated 309 Bcfe of proved reserves for $752 million in four transactions, each with an effective date of Nov. 1, 2007. The GOM transaction also included the assumption by the purchaser of future plugging and abandonment liabilities associated with those properties, which were reflected on El Paso’s balance sheet as asset retirement obligations of $93 million at year-end 2007. After closing adjustments, final cash proceeds are expected to be $650 million. The proceeds will be used to reduce debt incurred for the acquisition of Peoples Energy Production Co. (see Daily GPI, Oct. 1, 2007). “The sale of these properties, together with the Peoples acquisition, reduces our per-unit lease operating costs, increases our future production growth rate, and increases the onshore U.S. weighting of our inventory of future capital projects,” said Brent Smolik, president of El Paso Exploration & Production Co. “We will continue to look for opportunities to enhance our efficiency, improve the quality of our inventory, and further high-grade our portfolio.” Jefferies Randall & Dewey acted as financial adviser.

Santa Fe Snyder Corp. of Houston is high grading its asset basethrough a series of deals. The largest component of the company’sstrategic repositioning is the $160 million purchase of additionaldeepwater Gulf of Mexico interests from Marathon Oil. Santa Febought an additional 33% interest in the Angus/Manatee six-blockcomplex, bringing the total working interest in the Shell operatedfields to 49%. The deal closed Jan. 7. The company said it is alsodisposing of low-profit assets.