Fort Worth-based XTO Energy Inc. said Thursday it will spend $249 million to buy a set of natural gas-rich assets in East Texas and northern Louisiana with estimated proved reserves of 182 Bcfe. Kerr-McGee Corp. also is in the acquiring mood, announcing new lease agreements in the North Slope basin of Alaska and offshore Brazil.
XTO, whose focus is U.S.-based, estimates that its newest acquisitions are 90% natural gas and 50% proved developed and will add about 30 MMcfe/d to the company’s production base. Natural gas production in 2004 now targets an increase of 16% to 18%, up from the previous guidance of 13% to 15%. Most of the latest acquisitions are scheduled to close on or before Jan. 30.
In East Texas, XTO is acquiring 77 Bcfe of proved reserves (37% developed) in numerous fields including Carthage, Oak Hill, Beckville, Damascus and Willow Springs. Current production from these properties is about 14 MMcfe/d. The company is also expanding its presence in northern Louisiana with the purchase of 105 Bcfe of proved reserves (60% developed) in multiple, long-lived fields including Haynesville, Middlefork, Cotton Valley and North Shongaloo. The combined properties produce about 12.5 MMcf/d and 500 bbl/d. Development activities are expected to increase production on the new XTO properties to 40 MMcfe/d by the end of this year.
In line with its latest acquisition, XTO has set a $1.15 billion capital budget this year, with plans to dedicate $650 million of it to producing property acquisitions (including the $249 million announced). Another $500 million will be spent on all development and exploration events, slightly above the 2003 level.
“Given the current outlook for strong commodity prices and planned production growth, our capital budget should be substantially funded through record cash flow for the company,” said XTO CEO Bob Simpson. “This performance positions XTO to continue our consistent growth trajectory which is fueled by key acquisitions and low-risk drilling.” Simpson noted that if other “acquisitions beyond our budget arise, we will be opportunistic.”
Kerr-McGee Oil & Gas Corp., a subsidiary of the Oklahoma City-based independent, plans to acquire a 70% working interest in eight leases covering 12,000 acres off the Alaska coast, northwest of Prudhoe Bay, from Armstrong Alaska Inc.
Kerr-McGee will operate the leases and expects to spud at least one exploratory well during the first quarter. Armstrong holds the remaining 30% interest. The agreement includes the right to acquire interest in 13 additional leases in the area, totaling 54,000 acres.
In addition, subsidiary Kerr-McGee do Brasil Ltda. will acquire a one-third working interest in the BM-C-7 block in Brazil’s Campos Basin from EnCanBrasil Ltda., subject to government approvals. This year, the company expects to participate in one exploratory well on the 161,000-acre block in approximately 400 feet of water. EnCanBrasil operates the block with two-thirds interest.
“We continue to strategically enhance our prospect portfolio with acreage in world-class petroleum provinces such as the North Slope and Campos Basin,” said Dave Hager, Kerr-McGee senior vice president responsible for oil and gas exploration and production. “These new leaseholds offer large reserve potential in proven hydrocarbon basins, balancing our global deepwater opportunities.”
With the addition of this acreage, Kerr-McGee holds interests in more than 68 million undeveloped acres worldwide, with more than 80% in deepwater trends.
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