The properties, which are 75 percent natural gas, have proven reserves of 92 billion cubic feet of natural gas equivalent. Current production is from 11 fields and is running approximately 35 million cubic feet of natural gas equivalent per day, net.
The acquired assets include 86,237 gross acres from 21 blocks. The company will operate 97 percent of the proved reserves and will have an average working interest of 65 percent.
Houston Exploration plans to fund the transaction from its bank revolver and cash on hand at the time of closing. The company expects to have a debt- to-capitalization ratio of 29 percent after the acquisition. "This transaction is consistent with our strategy for enhancing the value of Houston Exploration on many levels," said Robert B. Catell, Houston Exploration chairman of the board. "In addition to being accretive to the company's earnings and cash flow per share, it adds high-quality reserves to our drilling inventory," Catell added.
"We see a lot of upside to these properties which will compliment our existing production and give us a strong platform from which to launch our 2004 Gulf of Mexico drilling program," commented William G. Hargett, Houston Exploration president and chief executive officer. "Current plans include allocating $40 million to $50 million of our 2004 capital to these fields to exploit proven and unproven drilling opportunities." Consistent with past acquisitions, the company has hedged 40 MMBtu per day during 2004 at a price of $4.96 per MMBtu to protect the acquisition economics. This is in addition to the company's existing hedge position for 2004 of 200 MMBtu per day which was previously announced.
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