Newfield increases U.S. onshore position

Takes step in Midcontinent growth with more than $100 million in acquisitions

Petroleum News

Newfield Exploration has taken another step in transforming itself from an exclusively offshore producer into a company with a far more diverse base that now includes a rapidly growing onshore position in the U.S. Midcontinent.

The Houston independent disclosed Sept. 8 that in addition to spending about $17 million to expand property interests in Texas, it coughed up $87.5 million in cash to acquire a little known, privately held Oklahoma company called Primary Natural Resources.

That acquisition gives Newfield an additional 64 billion cubic feet of gas equivalent reserves and 12.5 million cubic feet per day of equivalent production. More significant, when added to what properties Newfield already has picked up in the region, the Midcontinent now represents about 25 percent of Newfield reserves totaling 1.2 trillion cubic feet of equivalent.

Together with other properties the company has acquired, including more than 400,000 acres in Texas and Louisiana from its buy out of financially distressed EEX last year, about 57 percent of the company's proved reserves and 47 percent of its 618 million cubic feet in daily production are now situated onshore. That is in stark contrast to pre-2000 when virtually all of Newfield's reserves and production came from the Gulf's aged continental shelf.

Newfield now among top 20 Oklahoma producers

Newfield insisted that it does not target acquisitions for either the onshore or offshore. However, given the difficulty in building meaningful reserves on the mature shelf, the company would opt for longer-lived reserves onshore if a deal was otherwise equal.

�Primary Natural Resources has concentrated assets that are an excellent fit with ours,� said David Trice, Newfield's chief executive officer.

Newfield said Primary Natural Resources' assets not only increases its production by 15 percent in the region, but offers a two-year drilling inventory consisting of more than 100 drilling locations, primarily in Oklahoma's Anadarko basin. Newfield acquired more than 60,000 net acres in the deal. Two-thirds of current production comes from just six key fields, the company said.

Newfield said it would finance the Primary Natural Resources acquisition with borrowing under its bank facility. The acquisition closed Sept. 5, the company said.

In addition to the Primary Natural Resources deal, Newfield said it acquired an additional 30 percent interest in the Stiles Ranch field in Hemphill County, Texas, and is in the process of acquiring the field's remaining 20 percent interest, for a total of $9.1 million. The company said that for about $8 million, it also acquired an additional 8 percent working interest in the West Caney Creek Field in Wharton County, Texas.

Newfield also said it sold its Australian assets for an undisclosed sum to a company Newfield declined to name. However, Newfield said the assets, acquired in 1999 for $5 million in Newfield stock, generated about $20 million of total after-tax net income, inclusive of an estimated after-tax loss of about $10 million resulting from the sale and a $5 million after-tax ceiling write down in the 2003 second quarter.

Newfield's Australian assets included interests in two offshore oil fields and two related floating production systems. The properties produced a net 3,500 barrels per day to Newfield during the first half of the year.

In other deals, Newfield said it sold about $10 million of non-core Gulf properties.

About 3.5 million cubic feet per day of gas equivalent was net to the company.