Denver-based Westport Resources Corp. said it has agreed to purchase 211 Bcfe of oil and natural gas reserves in South Texas from privately held United Resources for $350 million. The reserves are 97% natural gas and 60% proved developed and are yielding 78 MMcfe/d of production. Westport expects to operate approximately 86% of the net production.

The company said the properties have an average lease operating cost of $0.50/Mcfe and a reserves-to-production ratio of eight years based upon estimated 2003 production. In addition to the proved reserves, the company said it has also identified greater than 100 Bcfe of probable and possible reserves and an exploratory prospect inventory of 48,000 gross (25,000 net) undeveloped acres.

The company said it will allocate $38 million to unproved properties, undeveloped acreage, seismic data, exploration projects and other assets. The purchase price allocated to proved reserves will be $1.48/Mcfe.

“This transaction brings Westport predominantly operated natural gas properties which complement our asset portfolio, and add over 200 potential exploitation drilling locations,” said Donald Wolf, Westport CEO. “In addition, we believe upside potential exists in numerous defined exploration prospects targeting the Wilcox, Lobo and Vicksburg trends.

“We expect this transaction to be accretive in 2004 adding 30 to 35 Bcfe of production, $80 to $100 million of net cash provided by operating activities and $0.30 to $0.35 of net income per share at NYMEX prices of $4.00/Mcf of natural gas and $24./bbl of oil,” he added, noting that the company will use cash and borrowings under its revolving credit facility to fund the acquisition, which is expected to close in December 2003.

Commenting on the transaction, Standard & Poor’s Ratings Services (S&P) said there would be no impact on Westport’s credit ratings and outlook. “The acquired properties have competitive production and finding costs that should help Westport begin to lower its very high cost structure,” S&P said. “Standard & Poor’s had expected Westport to make competitive acquisitions to help offset its high drilling costs.”

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