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Houston Exploration puts up $155 million for Gulf assets Plans to spend up to $50 million developing gas properties Petroleum News
The Houston Exploration Co., a small but rapidly growing independent, has cut its biggest deal to date, agreeing to buy all of the shallow-water Gulf of Mexico assets of privately held Transworld Exploration & Production for $155 million in cash.
Expected to close Oct. 15, the acquisition would give Houston Exploration an additional 92 billion cubic feet of gas equivalent reserves and 35 million cubic feet per day of equivalent production, the company said Sept. 15. The properties are said to be 75 percent natural gas.
The deal also represents a significant boost to Houston Exploration's bottom line, increasing overall reserves by 14 percent to around 742 billion cubic feet of equivalent and production by nearly 12 percent to about 335 million cubic feet of equivalent.
William G. Hargett, Houston Exploration's chief executive officer, said current plans include allocating $40 million to $50 million of the company's 2004 capital budget to developing the properties.
"We see a lot of upside to these properties which will complement our existing production and give us a strong platform from which to launch our 2004 Gulf of Mexico drilling program," Hargett said.
However, Houston Exploration declined to comment on the level of next year's capital program, but $50 million spent on the Transworld properties would equal about 16 percent of the company's $312 million budget for the current year. 15 offshore platforms included In addition to reserves and production, the Transworld deal comes with 15 offshore platforms, Houston Exploration said. The properties are located on 21 blocks covering 896,237 gross acres and 11 fields offshore Texas and Louisiana.
Houston Exploration said it would operate 97 percent of the proved reserves and would have a working interest of 65 percent. The properties are specifically located at Eugene Island, High Island, West Cameron and Vermillion.
To pay for the deal, the company said it would draw from its bank revolver and cash on hand at the time of closing. The transaction would increase Houston Exploration's debt to 29 percent of capitalization compared to 23 percent at the end of this year's second quarter, the company said.
Prior to the Transworld deal, Houston Exploration increased its onshore position significantly with a $48.1 million purchase of Burlington Resources properties in south Texas and a $69 million purchase of ConocoPhillips properties, also in south Texas.
In the 2003 second quarter, Houston Exploration saw its production increase to 292 million cubic feet per day of gas equivalent compared to 283 million cubic feet per day of equivalent for the same period a year earlier. Net income rocketed 64 percent to $28.9 million versus $17.7 million for the year-ago period.
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