Energen Resources Corp., the oil and gas acquisition and development subsidiary of Energen Corp., Birmingham, Ala., (NYSE: EGN) has closed the purchase of Permian Basin oil properties from Houston-based EnerVest Management Partners Ltd. for $168 million. The acquisition includes proved reserves of 21.8 million barrels of oil equivalent (80% undeveloped; 90% oil) and probable reserves of approximately 15 million barrels of oil equivalent. The combination of proved undeveloped and probable reserves is expected to generate a drilling inventory for Energen of approximately 470 wells over the next six years. Production is estimated to be 500,000 barrels of oil equivalent in 2006 and is expected to triple over the next five years. Assuming future development costs of approximately $145 million on proved reserves and $80 million on probable reserves, the all-in acquisition cost is $10.62 per barrel ($1.77 per thousand cubic feet equivalent). The acquired properties include the North Westbrook Unit in Mitchell County, Texas, which is contiguous to Energen's waterflood operations in the Southeast Westbrook Unit. Energen has entered hedge contracts to sell oil volumes comparable to approximately 85% of the acquisition's total estimated proved production for 2006 through 2009. Energen financed the acquisition through available cash and existing lines of credit and expects to repay short-term borrowings related to the acquisition during 2006. This is EnerVest's 12th closed transaction in 2005. The company has one acquisition pending. "With more than $1.2 billion in transactions, this has been our most active year; one in which we have doubled the size of our company even with the divestiture of four sets of properties," says John B. Walker, president and chief executive of EnerVest. "We expect similar activity in 2006. We plan to drill more than 300 wells next year and continue with our acquisition strategy of adding growth while maintaining a historical rate of return of approximately 30% to our investors."
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