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XTO acquisitions near $800M for year Deal-minded independent shells out $340 million for ExxonMobil properties in Permian and Powder River basins Ray Tyson Petroleum News Houston Correspondent
Exploration and production independent XTO Energy, barely four months into the year, has exceeded its initial 2004 acquisition budget with the purchase of ExxonMobil properties in the Permian Basin of West Texas and Powder River Basin of Wyoming.
Two weeks ago XTO told industry analysts that it was working on multiple deals and likely would spend more than the $650 million it had planned for the year. To that point the deal-minded company already had spent $450 million, or more than two-thirds of its budget.
In its latest transaction, announced May 3, XTO said it would shell out an additional $336-to $341 million for 38 million barrels of oil equivalent reserves, plus “upside reserve potential” of 30-to 50 billion cubic feet of natural gas equivalent through future development of Powder River coalbed methane.
That brings XTO’s 2004 total expense for acquisitions to around $790 million with roughly eight months remaining in the year. The company has said it might even buy a company outright should anticipated spending run into the “couple billion” dollar range for the year.
“These transactions highlight our efforts of working with the majors to acquire exceptional properties in regions where XTO has experience and a history of success,” Bob Simpson, XTO’s chief executive officer, said of the ExxonMobil property acquisitions. “Both the Permian Basin and the Wyoming assets are an ideal expansion to our current operations.” Initial addition of 6,600 boe per day The acquisitions will initially add about 6,600 barrels of oil equivalent per day in production, the company said, adding that XTO will operate more than 80 percent of the value of the properties. XTO said it also will retain an overriding royalty interest in the coalbed methane reserves.
Overall, the gas-weighted company expects to produce 790-795 million cubic feet per day in the 2004 second quarter, 810-815 million cubic feet in the third quarter, and 830-835 million cubic feet in the fourth quarter. Over the three quarters, oil production is expected to average 13,000-13,500 barrels per day and natural gas liquids between 6,000 and 6,500 barrels per day.
In northeastern Wyoming, XTO said it is acquiring from ExxonMobil proved reserves in the Hartzog Draw unit of Johnson County. Net daily production from this waterflood field is about 2,300 barrels of oil.
As operator, the company said it will control a 72 percent working interest across the 35,775-acre unit and begin secondary recovery and drill additional wells.
XTO said it also is expanding its presence in the Permian basin with the purchase of proved reserves in Yoakum and Gaines counties of West Texas.
The net production currently attributed to the properties is about 4,300 barrels of oil equivalent per day, 9 percent of which is natural gas. The company also is purchasing operated interests in four producing fields, Wasson, Russell, Champmon and Bruce. Ownership in non-operated properties includes working interests in two fields, Flanagan and Wasson 72.
XTO said it plans to finance the ExxonMobil purchases through a combination of cash flow, bank debt and the sale of common stock.
“We are acquiring a stable production profile to supplement the company’s overall decline-curve management,” XTO President Steffen Palko said.
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