El Paso Corp. was the winning bidder for leases covering approximately 123,100 acres in Reagan, Crockett, Upton and Irion counties in the September 22, 2010 University of Texas lease sale. The acquired leases target the Wolfcamp shale and add to approximately 12,000 net acres of existing leasehold in this play. El Paso now has a material position in a new oil shale program with significant resource and production potential.
"We are very excited to announce our entry into a promising new oil shale. Our acreage acquisition is the culmination of an extensive regional study by our technical team, and we expect it to become a new oil-focused core area," said Brent Smolik, president of El Paso Exploration & Production Company. "Today's announcement represents our second organic shale entry following our successful acquisition of more than 170,000 net acres in the Eagle Ford shale. The leasehold we have acquired has multiple pay opportunities and the combination of large contiguous blocks and a single royalty owner give us tremendous operational flexibility. We intend to leverage the successes we have had in our Haynesville and Eagle Ford shale programs, and we will update the market on our plans for the Wolfcamp shale during our third quarter earnings conference call on November 3, 2010."
El Paso remains committed to managing its E&P program for returns and having E&P live within its means. In addition, the company remains committed to generating free cash flow in 2012. To that end, the $180 million cost of the acquired acreage will be funded over time through portfolio rationalization, and future development capital will compete with other programs in the portfolio.
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