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XTO does it again Acquisition-minded independent shelling out $1.1B in largest deal ever Ray Tyson Petroleum News Houston Correspondent
Deal-minded independent XTO Energy, already approaching $800 million in acquisitions this year, has acquired another $1.1 billion in U.S. oil and gas properties, this time from ChevronTexaco.
Just weeks ago Fort Worth, Texas-based XTO announced the purchase of $340 million worth of U.S. properties from another major, ExxonMobil. Including various other acquisitions, XTO’s total for the year is nearly $1.9 billion, far surpassing the company’s original $650 million budget for full-year 2004.
“We’re set for the next 12 to 18 months … but we keep looking,” Bob Simpson, XTO’s chief executive officer, said in a May 17 conference call explaining XTO’s latest transaction, the company’s largest ever.
The combination of ChevronTexaco and ExxonMobil properties would immediately increase XTO’s overall production by a hefty 25 percent.
As a result of the ChevronTexaco acquisition, XTO said it is increasing its production growth target in 2004 to a range of 28-30 percent, up from earlier guidance of 20 percent. Production for 2005 was increased to a range of 18-20 percent, up from earlier guidance of 10-12 percent.
XTO now expects to produce daily 790-795 million cubic feet of natural gas in the 2004 second quarter, 870-875 million cubic feet in the third quarter, and 920-925 million cubic feet. Daily oil production is expected to average 17,500-18,000 barrels in the second quarter, 28,000-28,500 barrels in the third quarter, and 33,000-33,500 barrels. Daily natural gas liquids production is expected to average 6,000-6,500 barrels in each of the remaining three quarters. Properties acquired in seven states ChevronTexaco properties being acquired by XTO are located in seven states, with more than 90 percent of current production in Texas and New Mexico.
The acquired properties will expand XTO’s operations in its Eastern Region, the Permian Basin and Midcontinent, while opening a new coalbed methane play in the Rocky Mountains and a new operating region in South Texas, XTO said.
The properties specifically contain proved reserves of 786 billion cubic feet of gas equivalent, 88 percent of which are proved developed, XTO said, adding that 48 percent of the reserves are oil. The acquisitions are expected to add 88 million cubic feet of natural gas per day and 14,000 barrels of oil per day to XTO’s production base.
In the Permian Basin of West Texas and New Mexico, XTO said it is acquiring 80 million barrels of proved oil equivalent reserves in 16 counties. Net production from the properties is about 11,500 barrels of oil per day and 40 million cubic feet of natural gas per day. Primary producing fields in the area include Yates, Goldsmith, Eunice Monument, Fullerton and Puckett. The company said it expects to use its secondary recovery expertise to enhance operations and expand development upsides.
XTO Energy is also increasing its position in its Eastern Region with the purchase of 102 billion cubic feet of gas equivalent proved reserves in Franklin, Freestone, Limestone and Anderson counties of Texas and Claiborne Parish of Louisiana. Net production is about 13 million cubic feet of equivalent per day. The company anticipates upside opportunities in the primary producing fields of Teague, Oletha, Bethel, Haynesville and New Hope. New positions in Rockies, South Texas Also, new positions for the company will be established in the Rocky Mountains and South Texas.
In the Rockies, XTO is expanding its coalbed methane presence with the purchase of 67 billion cubic feet of equivalent proved reserves in the Buzzards Bench field of Emery County, Utah. The property is an offset to the Drunkard’s Wash field and is currently producing about 12 million cubic feet of equivalent per day. In the South Texas area, the company is purchasing 54 billion cubic feet of equivalent proved reserves in nine counties with net production totaling 20 million cubic feet of equivalent per day.
In the Midcontinent region, XTO said it is adding 67 billion cubic feet of equivalent proved reserves from 11 counties in Oklahoma and the Panhandle of Texas. These properties will contribute about 15 million cubic feet of equivalent production per day.
The remaining 16 billion cubic feet of equivalent proved reserves and net production of 3 million cubic feet of equivalent production per day are contained in various royalties and other miscellaneous properties, XTO said. Transaction to close Aug. 6 The transaction is scheduled to close by Aug. 6, with an effective date of Jan. 1, XTO said. The company said it expects to finance the deal through a combination of the sale of common stock and bank credit facilities. Additionally, the company said it may consider placement of long-term senior notes.
The company expects to record a significant gain to income upon close of the sale, which is anticipated in the third quarter of this year. The sale is part of plans announced in 2003 to improve the competitive performance of the company’s upstream portfolio through the divestment of non-strategic assets and the realignment of strategic business units.
With the sale of its properties to XTO, ChevronTexaco said it has reached agreement to sell about two-thirds of production targeted for sale in the company’s ongoing U.S. divestment program.
“This sale is significant,” said Peter Robertson, ChevronTexaco’s vice chairman. “It is a key step in our drive to streamline our portfolio of assets to approximately 400 core fields … in the United States and Canada. Furthermore, the transaction allows us to focus on maximizing and growing the value of our base business.”
Meanwhile, XTO said it has revised its 2004 capital budget for development and exploration expenditures of $600 million to provide for activities on properties acquired year-to-date.
The budget specifically was increased to include $30 million for work in the Barnett Shale, $15 million for activities on the ExxonMobil properties and $15 million for activities on ChevronTexaco properties. Additionally, East Texas and Louisiana will account for $340 million of the total 2004 budget, XTO said, adding that the San Juan, Raton and Arkoma basins combined will get about $100 million in development funds. Alaska, the Permian Basin and the Hugoton Royalty Trust properties’ development plans are expected to total another $35 million, while $25 million will be used for exploration, the company said.
The remaining $40 million has been allocated to facilities additions and projected increases in steel prices, XTO said.
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