In a double swap of sorts, XTO Energy Inc. purchased some Powder River Basin properties from CMS Oil and Gas Co. for $100 million, then exchanged those properties with Marathon Oil Co., paying $164 million for natural gas-rich assets in East Texas, Louisiana and the San Juan Basin of New Mexico. All said and done, XTO’s transactions, expected to close May 1, will increase its daily production by 37 MMcf, 1,050 bbl of natural gas liquids and 120 bbl crude oil.
The Fort Worth-based XTO also signed a definitive agreement to purchase more producing properties in the San Juan Basin from Marathon for $43 million, and disclosed that it has completed a $20 million acquisition of assets in its East Texas Freestone trend from an undisclosed buyer.
“With a proved producing reserve base of 145 Bcfe, these transactions provide a solid wedge of long-lived production in our core areas with the potential for additional development,” said Bob R. Simpson, XTO CEO.
Marathon said its newest assets, which add more than 400 Bcf of Powder River Basin resources, including 110 Bcf of proven reserves, will allow it “to leverage its expertise in coalbed methane development in this core area.” The company also expects to reduce its per-unit operating expenses by leveraging economies of scale in the area. The overall effect on its 2002 worldwide annual production is expected to be neutral or slightly incremental.
“This trade strengthens our position in the Powder River Basin and enhances our competitive position in this core area by establishing Marathon as the leading acreage holder and second largest producer,” said Steve Hinchman, Marathon’s senior vice president of Production Operations. “This is part of our strategy to create sustainable value growth by investing in high- quality opportunities, reducing operating costs and building financial strength, and doing so in an innovative and agile way. We’re focused on getting bigger and better in fewer places.”
These agreements are part of a trade auction announced by Marathon in late February to market selected properties in a competitive process designed to establish a greater presence in core areas where the company’s size, infrastructure and regional expertise will create additional value. It said that “additional trade transactions are being pursued.”
The transaction will give CMS Oil and Gas a $20 million pre-tax gain. The sale agreement involves all of CMS Oil and Gas’ approximately 280,000 net leasehold acreage, including its interests in producing gas wells in the Powder River Basin. CMS Energy will continue to own its gathering and processing assets in the Powder River Basin through CMS Field Services Inc., including ownership in the Bighorn and Fort Union gas gathering systems.
Cash proceeds from the sale will be used to reduce debt and improve CMS Energy’s consolidated balance sheet. Upon closing the sale, CMS Energy will have received approximately $2 billion of cash from asset sales, securitization proceeds and proceeds from liquefied natural gas monetization out of its $2.9 billion asset optimization program to improve its balance sheet.
Â©Copyright 2002 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.
© 2022 Natural Gas Intelligence. All rights reserved.
ISSN © 2577-9877 | ISSN © 1532-1266 |