XTO Energy's internal engineers estimate long-lived proved reserves to be about 21.1 million barrels of oil equivalent (MMBOE), 75% of which are proved developed. The acquisition will initially add about 3,800 barrels of oil equivalent per day (BOE/d), of which 83% is oil. The Company is targeting a 25% production rate increase over the next two years. XTO will operate more than 70% of the value of these high-margin properties, which have a lease operating expense of about $7 per barrel.
"This transaction highlights our ongoing focus in acquiring specific properties in regions where XTO has experience and a history of increasing production and reserves," stated Bob R. Simpson, Chairman and Chief Executive Officer. "In line with our 2004 acquisitions with both Exxon and ChevronTexaco, this Permian Basin package is an ideal overlay to our current operations. We continue to capture opportunities for XTO Energy that are consistent with our proven strategy of buying quality long-lived reserves, demanding strong economic returns and building a storehouse of substantial development upsides."
The significant producing properties in the acquisition package include Vacuum Field of Lea County, New Mexico and Cordona Lake Field in Crane County, Texas. Vacuum Field contributes about 2,400 BOE/d of production from multiple zones including the Morrow, Penn, Abo, Clearfork, San Andres and Grayburg formations. Cordona Lake Field produces about 900 BOE/d from the Devonian formation. Other producing fields in the package include Goldsmith in Ector County, Texas, St. Lawrence in Glassock County, Texas and Blanco in Rio Arriba County, New Mexico. Upside reserve potential exists through extensive development of producing formations, reservoir recovery enhancements and operational improvements.
Based on the January 1, 2005 effective date, the closing price was $200 million. Production volumes will be attributable to XTO beginning July 1, 2005. The Company anticipates funding the purchase through a combination of cash flow and bank debt.
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