Encore Acquisition Co., Fort Worth, Texas, (NYSE: EAC) plans to acquire properties in the Midcontinent and East Texas from Exco Resources Inc., Dallas, (NYSE: XCO) for $375 million in cash.
The Midcontinent properties are comprised of assets primarily in the Norge Marchand Unit in Grady County, Oklahoma, a waterflood that produces from the Marchand sandstone and has estimated original oil in place of 200 million bbl. Forecast production for the unit is 1,955 bbl. of oil equivalent per day, and the field is 100% operated. The acquired properties also include assets in the Texas Panhandle, southwestern Kansas, and western Oklahoma. The Midcontinent package has estimated proved developed reserves of approximately 12.8 million bbl. equivalent (50% oil and gas liquids; 100% proved developed producing) with a reserve-to-production ratio of 12.1 years. The Norge Marchand reserves represent approximately 63% of the Midcontinent package.
The East Texas properties include long-life assets in Gregg, Upshur and Smith counties, mainly in Gladewater Field and including Overton Field which produce primarily from the Cotton Valley sands. The East Texas properties include 495 gross wells with forecasted production of approximately 17.3 million cu. ft. equivalent of gas per day (2,889 bbl. equivalent).
Gladewater’s estimated proved developed reserves are approximately 10.3 million bbl. equivalent (95% gas; 100% proved developed producing), with total East Texas reserves of 11.8 million bbl. equivalent. The East Texas reserve-to-production ratio is 11.1 years.
As of year-end 2008, according to Exco estimates, the total estimated proved reserves were 4.7 million bbl. of oil and 148 billion cu. ft. of gas (176 billion cu. ft. of gas equivalent). Current net production includes 1,223 bbl. of oil per day and 26.9 million cu. ft. of gas per day (34.1 million cu. ft. of gas equivalent per day). Encore estimates total proved reserves to be 24.6 million bbl. equivalent (100% proved developed producing; 72% gas), production of 5,795 bbl. per day, and a reserve-to-production ratio of 11.6 years.
The sale includes approximately 66,700 net acres, of which approximately 7,000 acres are undeveloped, as well as gathering systems and compression facilities.
Closing is expected in August. The effective date is April 1.
Encore intends to finance the acquisition through proceeds from the sale of certain properties in the Rockies and Permian Basin to MLP subsidiary Encore Energy Partners LP (NYSE: ENP) for $190 million in cash and borrowings under its revolving credit facility for the remaining amount.
Scotia Waterous (USA) Inc. and Tristone Capital LLC were advisors to Exco.
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