TexCal's proved reserves were 31.4 million barrels of oil equivalent (MMBOE) at December 31, 2005, according to a report prepared by DeGolyer and MacNaughton, TexCal's third-party reservoir engineering firm. In addition to the proved reserves, Venoco has internally estimated an additional 22 MMBOE of probable and possible reserves related to the TexCal assets. Based on the 31.4 MMBOE of proved reserves, the transaction implies a cost of $14.50 per BOE. Including the 22 MMBOE of probable and possible reserves, the transaction implies a cost of $8.52 per barrel of oil equivalent (BOE). TexCal's current daily net production is approximately 5,200 BOE per day (BOE/d), implying a reserve to production ratio of 16.5 years.
In the Sacramento Basin, Venoco and TexCal were the two most active drillers in 2005, drilling 21 and 18 wells, respectively. In 2005 TexCal increased its production in the basin from 4.2 million cubic feet per day (MMcf/d) in the first quarter to 17.8 MMcf/d in the fourth quarter. TexCal's Sacramento Basin acreage is concentrated in the Grimes producing area, where Venoco has been aggressively adding to its core acreage position.
TexCal controls interests in several key fields in Texas where its largest asset is the Hastings field. Hastings is a major field which has produced over 600 MMBOE during its life. A limited amount of capital has been invested in the field over the past 10 years and Venoco believes that the field presents significant redevelopment opportunities.
TexCal, like Venoco, operates more than 90 percent of its assets, generally with high working interests.
Tim Marquez, Venoco's chairman and CEO, considers the TexCal acquisition exciting for several reasons. "First, the transaction gives Venoco a dominant position in the Sacramento Basin's developing resource play with considerable drilling opportunity, and strong full-cycle economics," he said. "Second, the transaction expands our probable and possible reserve base in areas with good infrastructure and attractive oil and natural gas price differentials to NYMEX. Third, the TexCal properties have had a history of financial distress and underdevelopment, which Venoco believes creates a significant opportunity for additional exploitation." Marquez added that the acquisition strengthens Venoco's cash margins per BOE.
Venoco said that it will continue to focus on consolidating transactions within California and select other opportunities consistent with its strategy of exploiting large, mature fields with significant production histories and substantial potential for additional development.
The transacton is expected to give Venoco estimated total reserves of 79 MMBOE and a reserve base that is 63 percent oil, 52 percent onshore, and 64 percent proved developed with a proved reserve to production ratio of 12.3 years based on December 2005 production.
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