By OGJ editors
HOUSTON, Apr. 16 -- XTO Energy Inc. has agreed to buy coalbed methane holdings in the Powder River basin for $101 million from CMS Oil and Gas Co. In turn, XTO Energy agreed to swap those properties with Marathon Oil Co. for oil and natural gas properties in eastern Texas and northern Louisiana.
XTO Energy, Fort Worth, said the transactions will increase its positions in East Texas, Louisiana, and the San Juan basin of New Mexico for a total cost of $164 million.
Collectively, these properties will increase XTO Energy's production by 37 MMcfd of natural gas, 1,050 b/d of natural gas liquids, and 120 b/d of oil.
Details of the deals
CMS Oil and Gas is selling all of its 280,000 net acres in the Powder River basin in Wyoming. CMS Energy will continue to own gathering and processing assets in the Powder River basin through CMS Field Services Inc., including ownership in the Bighorn and Fort Union gas gathering systems.
In turn, XTO has agreed to sell the Powder River basin properties acquired from CMS to Marathon Oil for properties in East Texas and Louisiana. In addition, XTO is buying producing properties in the San Juan basin from Marathon for $43 million.
XTO also recently completed a $20 million acquisition of properties in the East Texas Freestone trend from an undisclosed party.
"With a proved producing reserve base of 145 bcfe, these transactions provide a solid wedge of long-lived production in our core areas with the potential for additional development," said Bob R. Simpson, XTO chairman and CEO.
Marathon's purchase from XTO is expected to close May 1. In addition, XTO's purchase from Marathon is expected to close July 1.
As a result of the asset trade, Marathon will add more than 400 bcf of Powder River basin resources, including some 110 bcf of proven reserves. The company also will reduce unit operating expenses by leveraging economies of scale in this core area. The effect on 2002 worldwide production is expected to be neutral or slightly incremental, the company said.
Steve Hinchman, Marathon's senior vice-president of production operations said, "This is part of our strategy to create sustainable value growth by investing in high-quality opportunities, reducing operating costs, and building financial strength, and doing so in an innovative and agile way. We're focused on getting bigger and better in fewer places."
