Cross Timbers Oil Co. (NYSE-XTO) said Aug. 12 that it has entered into a definitive agreement with various Shell Oil Co. affiliates to acquire their interests in the Middle Ground Shoal field in Cook Inlet. Through a series of transactions, Shell in turn will receive 2 million shares of Cross Timbers’ common stock, subject to certain price guarantees and other considerations. 
Cross Timbers is receiving a 100 percent working interest in two state of Alaska oil and gas leases and the offshore installations in the Middle Ground Shoal field. The properties include two operated production platforms set in 70 feet of water about 7 miles offshore and a 50 percent interest in certain operated production pipelines and onshore processing facilities. 
Cross Timbers said that its engineers estimate proved reserves to be 12 million barrels of oil. Current net daily production is approximately 3,600 barrels per day from 31 producing wells. Production is primarily from the multiple zones within the Miocene-Oligocene-aged Tyonek formation between 7,300 feet and 10,000 feet subsea with an estimated reserve-to-production index of 9 years. 
Three transactions, effective for economic purposes on July 1, 1998, are anticipated to close Sept. 30, 1998, and are subject to approval of Shell’s board of directors and third party consents and typical purchase price adjustments. The 2 million shares of Cross Timbers’ common stock are unregistered and are subject to certain guarantees regarding the share value in early 1999 and other adjustments, the company said. In early 1999, Cross Timbers intends to register these shares for possible re-sale by Shell. In addition, Cross Timbers is obligated to make certain deferred payments, not to exceed $6 million, triggered by NYMEX West Texas Intermediate crude oil prices of $18.50, $19.50 and $20.50. 
“We are extremely excited about this opportunity,” Bob R. Simpson, chairman and chief executive officer of Cross Timbers, said in a statement. “It has high-margin production and increases our daily oil production rate by approximately 30 percent as well as provides significant additional reserve potential. 
“Moreover, the properties further our progress toward our 1999 cash flow per share goal of $4, and strengthen our balance sheet with equity,” he said. “The acquisition also expands our franchise and lays the foundation for substantial growth beyond 1999.” 
“In keeping with previous property purchases, this acquisition has all the attributes we seek — complex geology, stable production, long producing history and significant upside potential,” said Steffen B. Palko, Cross Timbers’ vice chairman and president. “Because of its complex, multiple-pay characteristics, this property offers numerous development drilling and recompletion opportunities. The east flank of the reservoir has been under a highly successful waterflood since 1969. Secondary recovery operations on the west flank are very prospective as a successful pilot waterflood has already been initiated. We intend to implement full scale waterflood operations on the west flank.” 
This will be Cross Timbers’ first operations in Alaska and the company said it will be developing plans to staff the operations. Since Shell will no longer have operations in the area, Cross Timbers said it will be interviewing Shell’s local employees. 
Cross Timbers Oil Co. is engaged in the acquisition, exploitation and development of producing oil and gas operations. The company, whose predecessors were established in 1986, completed its initial public offering in May 1993. Its properties are concentrated in Texas, Oklahoma, Kansas, New Mexico and Wyoming.