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Another big deal for XTO Energy
Petroleum News Houston Staff
Acquisition-minded XTO Energy has done it again, this time cutting a $400 million deal to acquire natural gas and coalbed methane properties from Williams in Colorado, New Mexico and Kansas.
The transaction, announced April 9, comes on the heels of $325 million worth of U.S. acquisitions XTO made in separate deals last year with Marathon Oil, CMS Oil & Gas and privately held JM Huber. Williams deal fits XTO’s game plan XTO’s latest acquisition fits nicely into the company’s game plan to build reserves and production rapidly, a path not shared by many of its fellow U.S. independents during the economic downturn.
The transaction is scheduled to close on June 6, the companies said. Williams said it had received an initial $40 million deposit from XTO, in accordance with deal terms.
Williams’ properties would add proved reserves of 311 billion cubic feet of gas equivalent and 60,000 million cubic feet of gas equivalent production per day to XTO’s growing base. At year-end 2002, XTO had total proved reserves of 3.37 trillion cubic feet of gas equivalent and was producing about 665,000 million cubic feet of gas equivalent per day.
That kind of aggressive reserve and production building has transformed the Fort Worth, Texas-based exploration and production company into a leading independent gas producer in the United States. In 2002, XTO gas production alone averaged 514,000 million cubic feet per day, a 23 percent increase over 2001 production of 417,000 million cubic feet per day. Acquisition has production upsides “Altogether, the (Williams) properties offer more development upsides while reducing the company’s overall decline rate, a key factor in ensuring predictable future growth,” said Bob Simpson, XTO’s chairman and chief executive officer.
The 311 billion cubic feet of gas equivalent being sold to XTO represents about 11 percent of Williams’ proved reserves of 2.8 trillion cubic feet equivalent at year end. Still, the company this year is expected to average roughly 470,000 million cubic feet of gas equivalent per day.
In Colorado’s Raton Basin, XTO said it was acquiring proved reserves of 121 billion cubic feet of gas equivalent and 23,000 million cubic feet of gas per day in production. Upon closing, XTO would hold 100 percent interests across 54,317 acres of coal bed methane leasehold and 191 producing wells. The acreage is contiguous and only 40 percent developed, the company noted.
In Kansas’ Hugoton Field, XTO said it was buying reserves of 107 billion cubic feet of gas equivalent and about 24,000 million cubic feet per day of gas production. The company would gain 109,819 net developed acres, with 341 operated wells and an average working interest of 84 percent.
In the San Juan Basin, the company said it was purchasing reserves of 83 billion cubic feet of gas equivalent located in New Mexico and Colorado. The properties produce about 13,000 million cubic of natural gas per day, of which 5,000 million cubic feet per day is coal bed methane gas. The leasehold encompasses 15,132 acres, with XTO working interests ranging from 1-to 68 percent, the company said. Williams targeting sales Williams said the transaction would result in an estimated pre-tax gain to the company of $80-to $100 million. In an effort to improve its financial health, the company has announced or closed on $1.3 billion of $3.7 billion of assets targeted for sale. Other assets the company said it is marketing include properties in the Denver-Julesberg, Green River basins, as well as Gulf Coast properties.
Exploration and production properties identified for sale is “a key of our plan to strengthen our finances” and allows the company “to maintain its high-profile operating positions” in other areas of the United States, Williams CEO Steve Malcolm said.
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