EXCO to Acquire Gas Producer for $1.2 Billion in Cash
EXCO Resources, Inc., through a wholly-owned subsidiary, on Monday announced an agreement to acquire Winchester Energy Co., Ltd. and its affiliated entities from Progress Energy, Inc. for $1.2 billion in cash, subject to purchase price adjustments.
This acquisition consists of producing and undeveloped natural gas properties with current production of approximately 75 Mmcfe per day from 588 producing wells of which 89% are operated. The average acquired working interest is 87% with an average 68% net revenue interest. The properties are located in the Cotton Valley, Hosston and Travis Peak trends in East Texas and North Louisiana. Proved reserves acquired are approximately 400 Bcfe with probable reserves of 300 Bcfe and possible reserves of 30 Bcfe. The properties include approximately 775 drilling locations, 33% of which are proved, and 106,000 net acres of leasehold of which 63% is held by production. The acquisition also includes six gathering systems with 300 miles of pipe and a 54 mile, 16" pipeline with throughput of 115 Mmcf per day, 35% of which throughput is company owned. The seller's reserves were estimated by independent petroleum engineers. Such estimates were subsequently reviewed by EXCO's internal engineers and adjusted as deemed necessary for additional drilling, well performance and other factors.
Preliminarily, EXPRO expect to allocate approximately $780 million to proved reserves, $150 million to the pipeline and gathering assets and approximately $270 million to probable and possible reserves and undeveloped acreage. The amount allocated to proved reserves represents $1.95 per proved Mcfe ($2.89 per Mcfe including development capital). Based upon all categories of reserves, the purchase price is $1.44 per Mcfe ($2.69 per Mcfe with all estimated development capital).
Pro forma for this acquisition, EXCO's total proved reserves are approximately 1.3 Tcfe and its reserves in all categories total approximately 2.0 Tcfe.
In connection with the acquisition, hedges of 18 Bcfe per year for 2007, 2008 and 2009 at prices of $9.07, $8.80 and $8.39, respectively, were put into place by the seller and will be assumed by EXCO. In addition, EXCO will assume approximately 5.5 Bcfe of additional existing hedges for 2006 from the seller at $9.33 per Mcfe.
The transaction is expected to close on October 2, 2006, subject to customary conditions to closing and governmental clearance.
The acquisition is being financed with a $750 million Term Loan Facility and a new Revolving Credit Facility. The subsidiary will be classified as an Unrestricted Subsidiary. The subsidiary will not be a guarantor of EXCO debt obligations nor will EXCO guarantee the indebtedness of the subsidiary.
“This acquisition is an important milestone in the execution of our overall acquire and exploit strategy,” said Douglas H. Miller, EXCO’s CEO. “The production and future opportunities of the Winchester assets bring our East Texas/North Louisiana focus to a new level. The combined production of the EXCO East Texas assets and the assets being acquired currently total more than 100 Mmcfe of natural gas per day. Combined proved reserves in the area will be almost 600 Bcfe and we will have enough undrilled locations for a multiple year drilling program. Obviously, we are very excited about the opportunities presented by this transaction.”
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Company: Winchester Energy Co., Ltd. more info
- EXCO to Acquire Gas Producer for $1.2 Billion in Cash (Jul 24)
Company: Progress Energy, Inc. more info
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