ExxonMobil continues to weed its garden of unwanted U.S. and Canadian oil and gas properties, selling packages totaling $415 million to big exploration and production independents Devon Energy and XTO Energy.
The industry giant also has established yet another joint venture with an E&P independent (XTO), a practice highlighted by last year’s alliance with Houston-based Apache, among the more successful exploiters of mature properties.
Devon, largest of the U.S.-based independents, said July 5 that it acquired about $200 million worth of properties from ExxonMobil subsidiary ExxonMobil Canada Energy in the Iron River area 120 miles northeast of Edmonton, Alberta.
The acquisition included 208 net sections of heavy oil leases and 51 net sections of conventional oil and gas leases, Devon said, adding that the deal specifically included about 165,000 net acres with an average working interest of about 96 percent. The acreage is said to be largely undeveloped.
Iron River is situated northeast of and immediately adjacent to Devon’s Manatokan field, which produces 7,000 barrels of oil per day from about 300 wells.
“We pursued this acquisition because of Iron River’s similarities to our Manatokan field and the success we have enjoyed there,” said Stephen Hadden, Devon’s senior vice president of exploration and production.
Manatokan analogous to Iron River
The company said Manatokan is a “direct analogy” to Iron River in its geology, reservoir characteristics, oil quality and operations. Moreover, about 85 percent of Devon’s wells in the field have been successful, and it is the largest and best performing field in Devon’s Lloydminster project area, according to the Oklahoma-based company.
Hadden said the ExxonMobil properties represent several years of “low risk drilling,” including 70 locations that are drill-ready. He said companies can generally drill year-round in the Lloydminster area and that Devon plans to have four or five rigs up and running at Iron Mountain in the 2005 third quarter.
“Iron River is exactly the kind of repeatable, cost- effective development project that exemplifies Devon’s North American onshore property base,” Hadden said.
The company said it anticipates drilling more than 800 wells on the Iron River property over the next four years, an effort Devon expects would boost production from a current 3,000 barrels of oil per day to about 30,000 barrels per day by 2010. Iron River is expected to add around 700,000 barrels of oil equivalent to Devon’s 2005 production, the company noted.
XTO purchases in Texas, N.M.
Forth Worth, Texas-based XTO said July 5 that it purchased ExxonMobil producing properties in the Permian Basin of West Texas and New Mexico for $215 million. Last year deal-minded XTO bought $340 million worth of onshore assets from ExxonMobil and $912 million worth of Chevron properties spread across seven states, including Texas and New Mexico.
XTO’s latest transaction with ExxonMobil brought long-lived proved reserves of about 21.1 million barrels of oil equivalent, 75 percent of which are proved developed, XTO said, adding that the acquisition will initially add about 3,800 barrels of oil equivalent per day to XTO production, 83 percent of which is oil. The company projected a 25 percent production rate increase over the next two years.
“This transaction highlights our ongoing focus in acquiring specific properties in regions where XTO has experience and a history of increasing production and reserves,” said Bob Simpson, XTO’s chief executive officer. “This Permian Basin package is an ideal overlay to our current operations.”
XTO also in JV with Exxon
In a separate deal with ExxonMobil, announced June 30, XTO said it executed an agreement with the mega-major to develop acreage in the northeastern portion of the Piceance basin in northwest Colorado.
Under the terms of the joint venture, XTO will farm-in about 69,500 contiguous gross acres east of ExxonMobil’s Piceance Creek unit in Rio Blanco and Garfield counties. XTO will operate and earn a 50 percent working interest in the entire ExxonMobil leasehold by drilling four wells. The first well would target the Williams Fork (Mesaverde) formation with drilling to begin year-end, XTO said.
“The Piceance basin is an ideal addition to our tight-gas and unconventional property base,” XTO President Keith Hutton said. “This acreage position exposes XTO to a portion of the trillions of cubic feet of natural gas the basin is projected to hold.”
In May 2004, ExxonMobil and independent Apache formed a joint venture involving a broad range of their prospective and mature properties in the United States and Canada. ExxonMobil gained deep gas rights to certain Apache properties in the Gulf of Mexico and onshore Louisiana, while Apache gained access to ExxonMobil properties in Canada, the Permian Basin of West Texas and New Mexico.
Earlier this year the two companies signed an agreement to expand their exploration and development activities in Alberta. The deal, which they said would capitalize on each company’s strengths, added 800,000 acres to Apache’s existing 6.9 million acres in Western Canada.
ExxonMobil Canada Energy farmed out its interest in about 650,000 acres of additional undeveloped property interests to Apache Canada over and above the more than 370,000 acres conveyed last year.
Under the new agreement, Apache also was to test additional horizons on about 140,000 acres of the property conveyed in 2004. Apache committed to drill and operate 145 new wells in both shallow and deep zones over a 36-month period.
