El Paso Corporation has closed on the sale of certain Gulf of Mexico, Onshore, and Texas Gulf Coast properties as a part of its portfolio high-grading efforts. In total, El Paso contracted for the sale of an estimated 309 billion cubic feet equivalent (Bcfe) of proved reserves for $752 million in four transactions, each with an effective date of November 1, 2007.
The Gulf of Mexico transaction also included the assumption by the purchaser of future plugging and abandonment liabilities associated with those properties, which were reflected on El Paso's balance sheet as asset retirement obligations of $93 million as of December 31, 2007. After closing adjustments, final cash proceeds are expected to be approximately $650 million. The proceeds are being used for the reduction of debt incurred for the acquisition of Peoples Energy Production Company in September 2007.
"The sale of these properties, together with the Peoples acquisition, reduces our per-unit lease operating costs, increases our future production growth rate, and increases the onshore U.S. weighting of our inventory of future capital projects," said Brent Smolik, president of El Paso Exploration & Production Company. "We will continue to look for opportunities to enhance our efficiency, improve the quality of our inventory, and further high grade our portfolio."
On January 16, 2008, El Paso had entered into purchase and sale agreements totaling $517 million for properties in its Texas Gulf Coast and Onshore regions with an estimated 191 Bcfe of proved reserves. Today's announcement includes the sale of Gulf of Mexico properties with proved reserves of an estimated 118 Bcfe for $235 million plus the assumption of future plugging and abandonment liabilities.
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