Primary Natural Resources is a private, independent exploration and production company with focused operations in the Anadarko Basin of Oklahoma. As of June 30, 2003, Primary had proved reserves of 64 billion cubic feet equivalent. Approximately 80% of Primary's reserves are natural gas and 65% are proved developed. Primary operates approximately 90% of its production and reserves. The current reserve life index on these properties is about 13 years.
"Primary Natural Resources has concentrated assets that are an excellent fit with ours," said David A. Trice, Newfield President & CEO. "This deal will increase our daily production from the region by more than 15% and provides us with more than 100 drilling locations -- or about a two-year inventory. We see the potential to expand our recent 'gas mining' initiative to this new acreage base."
Current production from Primary's fields is about 12.5 MMcfe/d, of which 83% is natural gas. About two-thirds of the current production is from six key producing fields. In total, Newfield acquired an interest in 120,000 gross acres and more than 60,000 net acres.
The Mid-Continent now represents nearly 25% of Newfield's total proved reserves. These assets have longer-lived reserves and the addition of this focus area has helped to significantly lengthen Newfield's reserve life index. About 90% of Newfield's proved reserves in the Mid-Continent are natural gas and the majority of the producing fields are located in Oklahoma. Newfield is now among the top 20 producers in Oklahoma, owning an interest in more than 300,000 net acres and more than 20,000 mineral acres. The Company operates about 75% of its total proved reserves in the Mid-Continent. Newfield financed the acquisition with borrowings under its bank facility. The acquisition closed on September 5.
Newfield also announced the sale of Newfield Exploration Australia Ltd., which owned all of Newfield's properties in Australia. Since the acquisition of these properties in mid-1999, the assets generated approximately $20 million of after-tax net income, inclusive of an estimated after-tax loss of approximately $10 million resulting from the sale and a $5 million after-tax ceiling test write down in the second quarter of this year. The sale closed late last week. Newfield owned an interest in two producing oil fields and two related FPSOs. Average net daily production in the first half of 2003 was approximately 3,500 BOPD.
The Company recently sold its interests in some non-core Gulf of Mexico properties for approximately $10 million. Net production associated with these assets was about 3.5 MMcfe/d.
Newfield recently acquired from another operator an additional 8% working interest in its West Caney Creek Field, located in Wharton County, Texas. Newfield's interests across the operated property now range from 60-76%.
Newfield recently acquired from other interest owners a 30% additional interest in the Stiles Ranch field. The Company-operated field is located in Hemphill County, Texas. The field is currently producing 2.7 MMcfe/d gross and Newfield expects to drill at least three additional wells in the field in 2003 and eight in 2004. This is one of the areas where the Company is implementing its recent gas mining initiative. Newfield now owns an 80% working interest in the field. The Company is in the process of acquiring the remaining 20% interest in the field and expects the transaction to close in the next several weeks. Combined, these transactions are expected to total approximately $9.1 million.
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