Petroleum

The Natural Gas Supply Association and Independent PetroleumAssociation of America made their displeasure clear over PresidentBill Clinton’s decision last week to extend a moratorium onoffshore drilling. “Cleaner air and increased use of affordable,clean-burning natural gas depend on access to the large natural gasfields off the nation’s coasts,” said NGSA President Nicholas Bush.”Continuing today’s severe restrictions on offshore natural gasproduction is simply not in the nation’s best interest.”

Lomak Petroleum and Domain Energy Corp. said they will merge toform a company with a reserve base of nearly 1 Tcf in gasequivalents, reserve life of 12 years and extensive development andexploration opportunities. The company to be created will be calledRange Resources Corp. and will have total assets exceeding $1.1billion.

As part of a major reorganization plan, the American PetroleumInstitute (API) says it plans to establish a “natural gascomponent” aimed at attracting medium-to-small sized companies asnew members and at retaining current API members.

By acquiring Union Texas Petroleum in a deal worth about $3.3billion, ARCO would grow production, reserves and its presenceinternationally. The two companies agreed to merge yesterday, withARCO acquiring all Union Texas common stock for $29 cash per share,including debt and preferred stock of Union Texas. The deal willimmediately add 140,000 barrels/d of oil equivalent to ARCO’sproduction. Union Texas production last year was 44 million BOE,51% of it natural gas.

Union Pacific Resources Group agreed to pay about $59 millionfor Occidental Petroleum’s interests in four oil and gas fields insouthwest Wyoming, 23 producing wells in Louisiana, increasedownership in the Masters Creek Gas Plant and nearly 127,000 netacres in the Louisiana extension of the Austin Chalk trend.

A U.S. subsidiary of British-Borneo Petroleum Syndicate agreedto acquire 16.67% interest in Discovery Producer Services and itssubsidiary Discovery Gas Transmission. In addition, British-Borneohas the right to increase its ownership to 33.3% over the nextthree years. The transaction is valued at about $83.3 million.

Canadian Occidental Petroleum subsidiary CXY Energy of Dallasagreed to acquire 50% of Fina Oil and Chemical’s interests in 64lease blocks in the Gulf of Mexico.

Chesapeake Energy agreed to buy MC Panhandle Corp., a whollyowned subsidiary of Occidental Petroleum for $105 million cash forestimated proved reserves of about 100 Bcf in the West PanhandleField in Carson, Gray, Hutchinson and Moore counties of the TexasPanhandle. The reserves are 100% gas, have an estimatedreserve-to-production index of eight years, and are 85% proveddeveloped producing. During 1997, the wells produced about 13 Bcf(36 MMcf/d) net to Occidental’s interest from 256 wells, of whichall but two were Oxy operated wells. Chesapeake will assumeoperations of the acquired wells and will own an average workinginterest and net revenue interest of 99.5% and 85.2%, respectively.The transaction is effective Jan. 1, with closing scheduled May 29.With this purchase and pro forma for Chesapeake’s pending Hugotonand DLB transactions, Chesapeake’s estimated proved reserves willincrease to about 1,050 Bcfe. The Hugoton Energy Panhandleproperties to be acquired by Chesapeake were originally acquiredfrom Oxy in 1992. Chesapeake CEO Aubrey K. McClendon, said, “asresult, we expect to be able to operate these reunited propertiesvery efficiently out of Hugoton’s existing Pampa, TX, field office.For example, pro forma for these acquisitions, we expect our directproduction costs in the Texas Panhandle, excluding productiontaxes, to average approximately $0.30 per Mcf. These arehigh-margin, low-maintenance wells that we believe will provideaccretive results to our cash flow in 1998 and beyond.”

The Independent Petroleum Association (IPAA) has filed a lawsuitagainst the Department of the Interior, claiming that through a newnatural gas royalty regulation DOI’s Minerals Management Service iscollecting a larger share of royalties than it is entitled to.