Cross Timbers Oil Co., Forth Worth, will more than double its inventory of acreage in East Texas' Freestone Trend by acquiring natural gas properties in East Texas and Louisiana from a private, unnamed company for $115 million.
Cross Timbers said the acquisition gives it more than 500 potential drilling locations in the Travis Peak, Cotton Valley Sand, Bossier Sand, and Cotton Valley Lime formations in the trend. Each location has an average gross reserve targets of 3.5 (2.4 net) bcf, or a total resource potential to Cross Timbers of more than 1.2 tcf of gas.
To develop the East Texas properties, Cross Timbers will raise its 2001 capital budget by $50 million to $250 million, which targets a 20% growth in gas production.
It said the new development opportunities, plus its existing inventory of leases, should allow it to increase its gas production to 535 MMcfd by the end of 2002, a 60% increase above the average daily production rate this year.
The properties being acquired are in Freestone, Limestone, and Robertson counties of Texas and Claiborne and Union parishes of Louisiana. Texas properties include leases in Farrar, Bald Prairie, Southwest Oletha, and Luna fields, which directly offset the company�s existing production. The Louisiana properties are in Colquitt and Oaks fields. Upon closing, the company will increase its acreage position in the East Texas Freestone Trend from 23,000 to 55,000 gross (49,200 net) acres.
Cross Timbers estimates current net production from the acquired properties at 8.5 MMcfd of gas and 220 b/d of oil from 153 gross (110 net) wells.
�These properties directly offset our existing properties and bridge the gap between our Bald Prairie and Freestone fields,� Steffen E. Palko, vice chairman and president of Cross Timbers, said. �The development opportunities included in this budget are highly economic,� Palko added. �It is not dependent on $5/Mcf gas. In fact, at $3.50/Mcf we would expect the budget to generate an impressive 60% internal rate of return.�
The effective date of the transaction is Jan. 1, 2001.
