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Cross Timbers to repurchase 1.9 million shares owned by Shell
Kristen Nelson
Cross Timbers Oil Co. said July 8 that it is selling 2 million shares of its common stock in an underwritten public offering. The company will use the proceeds of the offering to repurchase 1.92 million shares of Cross Timbers’ common stock owned by Shell Oil Co. and to reduce outstanding indebtedness by approximately $15 million.
The shares owned by Shell were issued in connection with Cross Timbers’ purchase of properties in Cook Inlet in October 1998 and the company said it was obligated to repurchase or to effect the sale of those shares prior to Aug. 16, 1999. Cross Timbers said it has previously provided consideration to Shell valued at $27.5 million.
Cross Timbers spokesman Preston Kirk told PNA July 8 that the company has been reducing debt from $921 million at the end of 1998. The goal, he said, was to reduce debt by about $300 million by May; he said debt reduction of about $220 million will have been achieved by the middle of July.
“We want to position the company for additional acquisitions as the majors consolidate and quality properties come to market,” Kirk said. “And we think that could begin happening late summer, early fall.”
Cook Inlet improvement plans The 1998 Cross Timbers purchase from Shell included the A and C platforms, two leases, a 50-percent interest in related pipelines and onshore process facilities. State records still show Shell as the owner of the oil and gas leases and Louis Baldwin, Cross Timbers’ senior vice president and senior financial officer, told PNA July 8 that the company is working with the Alaska Department of Natural Resources to complete transfer of the leases to Cross Timbers. Baldwin said the company believes that transfer will be completed in the not-too-distant future.
There are 29 producing wells and 11 water injection wells on the platforms, Kirk said. At the time of the acquisition the estimated proved reserves, which are offshore in the Middle Ground Shoals field, were 12 million barrels of oil with production of 3,700 barrels of oil a day. Production, Kirk said, is primarily from multiple zones within the Tyonek platform between 7,300 feet and 10,000 feet subsea.
The estimated reserve to production index for the Cook Inlet properties was 9 years at the time of acquisition. Typically and historically, he said, Cross Timbers doubles the reserves of properties they acquire within 3 to 5 years.
Kirk said techniques which the company employs to increase reserves include: recompletions; stimulations; artificial lift; a lot of automation where they can; new geology; may run 3-D; may do multiple completions out of the same drill-stem. Even though they are a low-cost producer of energy they apply the latest techniques, he said.
Expanded waterflood planned for Cook Inlet Kirk said that the company plans to improve its Cook Inlet properties in four ways: Waterflood operations will be expanded on the west flank of the field where tests have proven promising; the company will convert from gas lift to hydraulic or electrical submersible pumps; operating costs will be reduced with automation and offshore separation; a redefined geologic model will be used to determine potential drilling opportunities.
If the company identifies drilling opportunities at its Cook Inlet property, that drilling would probably take place next year, not this year, Kirk said. With current oil prices, Cross Timbers is moving from 80 percent gas to 90 percent gas, he said.
The company did revise its capital expenditures budget for 1999 in late June, Kirk said, from the $60-$70 million range to the $70-$90 million range. The company had $78 million in exploration and development expenditures in 1998, he said.
Kirk said that Cross Timbers has a 4-5 year inventory of drilling and recompletion prospects in its portfolio, about 1,000, but he didn’t know how many of those were in Alaska.
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