Loews Corp., New York, (NYSE: LTR) and XTO Energy Inc., Fort Worth, Texas, (NYSE: XTO) plan to acquire most of the U.S. onshore E&P operations of Dominion Resources Inc., Richmond, Va., (NYSE: D) in two deals valued at a total of $6.5 billion.
Loews will acquire Dominion's operations in the Permian Basin in Texas, the Antrim shale in Michigan and the Black Warrior Basin in Alabama for $4 billion. Proved reserves are approximately 2.5 trillion cu. ft. of gas equivalent. Dominion Exploration & Production Co. senior vice president of E&P Timothy Parker will lead Loews' new E&P company.
Loews chief executive James Tisch says, "These long-lived and low-risk natural gas-producing assets represent an excellent platform for Loews to enter the exploration and production business. We have a favorable long-term view of natural gas pricing in the U.S. and believe natural gas will increasingly be the fuel of choice in the future."
XTO will acquire 542,000 net acres (235,000 undeveloped) of Dominion's operations in the Rockies, Gulf Coast, San Juan Basin and South Louisiana (70% operated) for $2.5 billion. The Rockies assets make up the majority of the land and reserves and are primarily in the Uinta Basin, including interests in the Natural Buttes gas field in Utah, Drunkards Wash coalbed-methane field, which offsets the company's Buzzard Bench operations, and bolt-on properties in the San Juan Basin. The Texas assets are primarily in the Wilcox Trend in Colorado, Lavaca, Wharton and Zapata counties.
Production is 200 million cu. ft. equivalent per day. Proved reserves are 1.1 trillion cu. ft. equivalent.
XTO president Keith Hutton says, "These choice assets will efficiently fit into our operating basins. Our development teams have acquired new growth opportunities in tight-gas formations and coalbed methane in the Uinta Basin, entry into the Jonah Field of the Green River Basin, and legacy production in the San Juan Basin. The expansive undeveloped acreage in the Rocky Mountains, of which about 50% is located in Natural Buttes, is expected to add significant value to this transaction."
XTO plans to review its entire portfolio of producing properties, including this new acquisition, for spin-out of an MLP with an initial capitalization of more than $500 million. XTO chairman and chief executive Bob Simpson says, "In today's marketplace, we believe an opportunity exists with the MLP structure to further enhance the captured value of a portion of XTO's exceptional property base."
He adds that XTO has run four royalty trusts that have performed well for owners, and the formation of a new MLP will "unleash value to build for the future."
Dominion chairman, president and CEO Thomas Farrell says, "With today's announced divestitures, sales proceeds for more than 85% of reserves to be sold are known. We now have sufficient information to accurately model the new company on a post-divestiture basis."
Dominion will continue to own regulated assets, as well as E&P assets in Appalachia. It has sales under way of virtually all of its Gulf of Mexico assets to ENI Petroleum Co. Inc. (NYSE: E) for $4.8 billion and Canadian assets to Paramount Energy Trust, Calgary, (Toronto: PMT-UN) and Baytex Energy Trust, Calgary, (Toronto: BTE-UN) for approximately $583 million.
JPMorgan, Lehman Brothers and Juniper Advisory LP are financial advisors for Dominion. The XTO and Loews deals are expected to close in August.
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