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Kerr-McGee sheds Gulf shelf assets Small independent W&T Offshore pays $1.3 billion for about 500 wells producing 25,000 boe per day, sees 95 prospects Allen Baker For Petroleum News
Kerr-McGee has essentially completed its corporate realignment with the sale of its Gulf of Mexico shelf properties for $1.34 billion in cash, plus assumption of abandonment liabilities, figured at roughly $135 million. Buyer is small independent W&T Offshore, which just went public last year.
“The sale of the shelf assets is the final step in our announced strategy to divest of lower-growth, shorter-lived properties and focus on higher-impact opportunities,” said Dave Hager, Kerr-McGee chief operating officer, in a statement with the Jan 23 announcement.
W&T Offshore, of course, views the assets in a different light.
“The spread of properties across the Gulf of Mexico and upside potential fit in nicely with our core expertise. Our team has identified more than 95 exploration prospects related to these properties and our review is still in the early stages of evaluation,” says Tracy W. Krohn, chairman and CEO of W&T Offshore, based in Houston. Net proved reserves 74% gas The properties are on the outer continental shelf and in state waters of the Gulf. W&T Offshore estimates net proved reserves at 362 billion cubic feet of natural gas equivalents, and figures probable and possible reserves at 650 billion cubic feet of gas equivalents. The proved reserves are about 74 percent natural gas, and 72 percent are proved developed.
Before last summer’s hurricanes, production from the properties was about 230 million cfe per day, but the storms cut production by a third to 150 million cfe per day, or about 25,000 boe.
The new wells will nearly double W&T Offshore’s production, which was just short of 200 million cubic feet of gas equivalents in the third quarter of 2005, with some impairments due to the storms. The company showed a profit of $53 million for that quarter, even with the impacts of the hurricanes. W&T now has 500 wells The purchase gives W&T Offshore about 500 wells in 100 fields on 249 offshore blocks, including 83 undeveloped blocks. The holdings are primarily in water depths of less than 1,000 feet in an arc from near Corpus Christi, Texas, to Mobile, Ala. W&T Offshore plans to operate 36 of the producing fields. Those fields represent 66 percent of the net production and 60 percent of the net reserves.
The company expects to finance the purchase with bank debt and cash on hand. It says it already has received a commitment from Toronto Dominion Bank for up to $1.3 billion in a senior secured credit facility. The effective purchase date for the transaction is Oct. 1, 2005. It is expected to close early this year.
W&T Offshore, founded in 1983 and now listed on the NYSE as WTI, says it will be one of the top three holders of acreage in the Gulf once the transaction is completed, with roughly 2.3 million gross acres. Its proved reserves (before the transaction) totaled 467 bcfe as of the end of 2004, with 49 percent of that natural gas and 62 percent proved developed. Before the acquisition, it had working interests in about 110 fields, with a majority of daily production coming from operated wells.
Kerr-McGee, based in Oklahoma City, is now concentrating on the Rocky Mountains, the deepwater Gulf of Mexico and international ventures, including China’s Bohai Bay. The company also has done substantial recent exploration in the Beaufort Sea and onshore in Alaska.
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