BP Exercises Option To Buy Marlin, Dorado Fields
W&T Offshore, Inc. announced Tuesday that Shell Offshore Inc. has informed W&T that BP Exploration & Production Inc., the operator of the Gulf of Mexico deepwater blocks Viosca Knoll 871 & 915, known as the Marlin and Dorado fields, has elected to exercise its preferential rights to purchase Shell's interest in the fields. As a result, the Marlin and Dorado fields will not be included in W&T's recently announced acquisition from Shell.
On November 4, 2010, W&T announced the acquisition from Shell of interests in five Gulf of Mexico deepwater producing fields known as Tahoe, SE Tahoe, Droshky, Marlin and Dorado fields with an effective date of September 1, 2010. The closing of the acquisition of Shell's interests in the Marlin and Dorado fields was funded in escrow pending waiver or exercise of preferential rights affecting these two properties. At that time, W&T also signed a letter of intent to acquire Shell's interest in a sixth property located in the Gulf of Mexico shelf. W&T agreed to pay $450 million in cash for interests in all six properties prior to post-effective date adjustments with estimated proved reserves of 154.3 billion cubic feet of natural gas equivalent ("Bcfe").
Excluding the Marlin and Dorado fields, W&T paid or anticipates paying an aggregate of $193 million in cash, subject to customary post-effective date adjustments, and assume approximately $32 million for the asset retirement obligations associated with the four offshore producing properties acquired or intended to be acquired from Shell. Both amounts are subject to change based on the number of properties ultimately acquired, all as described below. The acquisition was funded with W&T's available cash on hand and from borrowings on its revolving credit facility.
The Company anticipates funding the Gulf of Mexico shelf property, subject to the letter of intent, with cash on hand. Combined production, net to our interest or Shell's interest, in the four fields is currently approximately 2,100 barrels of oil per day and 68 MMcf of natural gas per day or approximately 80.6 MMcfe per day. Proved reserves associated with the acquired properties and the property subject to the letter of intent are estimated at 3.0 million barrels of oil or natural gas liquids and 104.1 billion cubic feet of natural gas, or 121.8 Bcfe. These reserves were determined by Netherland, Sewell and Associates Inc. as of September 1, 2010, based on SEC reserves definitions and pricing.
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