The Houston Exploration Co., Houston, (NYSE: THX) has retained Wachovia Securities to sell its entire Gulf of Mexico asset base. Historically, the company's Gulf of Mexico production has accounted for some 40% of its total production. This sale is part of Houston Exploration's plan to execute a strategic shift in operations by selling its offshore operations and becoming a pure onshore U.S. gas producer. Year-end 2004 offshore reserves totaled some 291 billion cubic feet of gas equivalent, or 37% of the company's total proved reserves. The company plans to use sale proceeds to acquire additional assets in U.S. onshore basins, pay for the recently announced $163 million acquisition in South Texas, decrease debt under the its bank revolver, and potentially purchase its common stock. "For several years we have been building our onshore business and are now beginning more significant strategic moves to transform Houston Exploration. We are taking advantage of the current favorable market conditions for offshore properties in order to monetize the Gulf and focus our people and capital on longer-lived opportunities in the lower 48," says William G. Hargett, chairman and chief executive officer. "The returns in the Gulf remain extremely attractive, and our assets would be an excellent complement to the portfolios of several producers and a springboard for new entrants. After our sale, as a pure onshore organization, Houston Exploration should immediately increase its reserve life from six years to eight years and should offer its stockholders solid prospects for more predictable and stable production and reserve growth."
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