Newfield increases stake in Rocky Mountains

By OGJ editors
HOUSTON, May 16 -- Newfield Exploration Co. has agreed to acquire the Rocky Mountain assets of Stone Energy Corp. for $575 million. The transaction, expected to close in June, will expand Newfield's existing presence in the Uinta basin and provide an entry into large developments in many of the Rocky Mountain's most active areas.

The acquisition allows Newfield to add nearly 600,000 net acres, with proved reserves of 200 bcfe and probable and possible reserves of more than 150 bcfe. The proved reserves are 70% gas, of which 52% are developed, and have a 15-year life index, Newfield said.

Current net production is about 40 MMcfd of gas equivalent. And "significant upside exists through further field downspacing, secondary recovery, deep gas potential, and the development of emerging resource plays," Newfield said.

Acquired assets
The assets being acquired are in several basins. In the Green River basin more than half of the proved reserves included in the package are in Pinedale field in Sublette County, Wyoming. Newfield will own interests in about 8,000 gross acres (4,000 net) in the southeastern portion of the anticline. Since 2002, less than 30 wells have been drilled on this acreage. Net production is 12 MMcfd of gas equivalent from 27 producing wells. Based on ongoing regional activity, Newfield sees the potential for about 100 additional locations as field spacing is decreased to 20 acres and eventually 10 acres.

About 15% of the proved reserves included in the package are in Jonah field. Current net production is about 8 MMcfd of gas equivalent from 17 producing wells. Newfield has identified an inventory of more than 40 development locations on 10 and five-acre well spacing.

In the Williston basin of Montana and North Dakota, Newfield gains 75,000 net acres and about 35 bcf of gas equivalent of proved reserves. This area's current net production is 2,200 boe/d from about 140 producing wells. Drilling opportunities targeting the Bakken, Madison, and Red River formations have been identified. Newfield currently holds 65,000 net acres in the Williston basin associated with its Big Valley, Watford, and Arnegard prospect areas.

About 12 bcf of gas equivalent of the proved reserves to be acquired are in Scott field in the Powder River basin in Converse County, Wyoming. Newfield will acquire nearly 85% working interest in 14,000 net acres and has identified additional development drilling and recompletion opportunities in the field. Besides, deep exploration rights exist on 28,000 net acres (held-by-production) throughout the basin, which are prospective for developing resource plays.

In the Uinta basin in northeast Utah Newfield operates the shallow Green River formations in its Monument Butte field (acquired in 2004), covering about 100,000 gross acres. Newfield will acquire Stone's 40% interest in the deep gas rights beneath Monument Butte, giving Newfield a majority interest in these resources. Almost all of the acreage is held by production. Since 2005, Newfield has participated in five deep gas wells in the southeast portion of the field; the wells have all been successful. Additional drilling is planned this year.

Acquisition of Stone's Rocky Mountain assets also provides additional exploration opportunities in the Wind River basin of Wyoming; the Southern Alberta basin in Glacier County, Montana; the Uinta basin in Carbon County, Utah; and the Northern Denver-Julesburg (DJ) basin in Platte County, Wyoming.

Newfield believes that the Rockies will be an important part of future US gas supply and said it is now better positioned to be a major producer in the region.

The company expects to finance the transaction initially with credit and ultimately through asset divestitures. It intends to market its assets in Bohai Bay, China, properties in the UK North Sea and some smaller packages along the onshore Texas Gulf Coast and in the Midcontinent, as well as some properties in shallow water Gulf of Mexico.

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