MORE U.S. PRODUCTION CHANGES HANDS

More U.S. oil and gas production is acquiring new owners as some operators scale back operations and others see opportunities for growth.

It's part of a continuing program of adjustment to a depressed economy in the petroleum industry (OGJ, July 13, p. 14).

In the latest announcements:

Forest Oil Corp., Denver, agreed to acquire Transco Energy Co. subsidiary Transco Exploration & Production Co. (Tepco), Houston, for $45 million effective last Mar. 1. Certain Tepco assets will be retained for distribution to Transco Energy operating units prior to closing, expected Aug. 1.
Louis Dreyfus Natural Gas Corp., Oklahoma City, agreed to buy essentially all the U.S. oil and gas operations of Dekalb Energy Co., Denver, effective the first of this month. The sale will culminate an area by area review of operating economics Dekalb began in May 1991. The company will close its Denver office after Sept. 30 and transfer its headquarters to Calgary.
William Herbert Hunt Trust Estate, an affiliate of Petro-Hunt Corp., Dallas, completed the purchase of Chevron U.S.A. Production Co.'s interest in 93 operated oil and gas wells in Little Knife field of Billings, Dunn, and McKenzie counties, N.D., in the Williston basin. A 1976 discovery, the field is North Dakota's largest with production of 5,000 b/d at present and more than 53 million bbl cumulative.
The trade brings to five the number of U.S. production purchases Hunt has made this year.
"Producing property acquisitions will remain our primary domestic focus," said Bruce W. Hunt, Petro-Hunt president. "We expect to continue to make acquisitions in the second half of the year to further strengthen our key operating areas."
The purchase also covers a majority interest in the Little Knife gas processing plant operated by Chevron unit Warren Petroleum Co. Throughput averaged 15.1 MMcfd in 1991.
Black Stone Minerals, a Texas partnership managed by Black Stone Holdings Partnership, Houston, agreed to pay $15 million to Santa Fe Energy Resources Inc. and Santa Fe Energy Partners LP, both of Houston, for royalty and undeveloped mineral interests in 493,000 acres in East Texas and Louisiana, effective last June 1. The deal included an undivided 75% of Santa Fe's royalty interest in 109 producing wells.
Based on each entity's ownership in interests conveyed, Santa Fe Energy will receive $9.6 million and Santa Fe Energy Partners $5.4 million.
Mobil Exploration & Producing U.S. Inc. offered for sale oil and gas interests and related assets in nine fields of West Texas and Southeast New Mexico. Production is mainly gas, and net Mobil production in 1991 was about 30 MMcfd of gas and 900 b/d of crude and natural gas liquids, Randall & Dewey Inc., Houston, is providing engineering and divestment services to assist in the sale.

FOREST PURCHASE

Forest's Tepco acquisition will consist mostly of oil and gas leases in state and federal areas of the central and western Gulf of Mexico.

William L. Dorn, Forest chairman, president, and chief executive officer, said the new leases will fit well with the company's present gulf operation.

"The synergies resulting from the transaction are significant," Dorn said. "The acquisition will expand Forest's operations into the Texas gulf with little or no incremental general and administrative expense."

Forest will acquire an average 67% interest in 54 offshore leases covering about 247,000 gross acres and 158,000 net acres. Sixteen of the leases are producing, two are under development, and the rest are exploratory prospects.

Forest will take over operation of seven platforms, increasing to 29 the number of company operated platforms in the gulf.

Net production to Forest from properties covered by the transaction averages about 34 MMcfd of gas and 200 b/d of oil and condensate. After pipeline facilities are completed on one lease, oil and condensate production is expected to increase to more than 1,000 b/d.

Net proved reserves changing hands in the deal are estimated at 36 bcf of gas and 1.7 million bbl of oil and condensate. Forest also will acquire seismic data, processing and computer equipment, and other inventory.

Enron Gas Services Corp., Houston, will finance a substantial part of the deal through a production payment. Forest will repay the debt with production of about 17 bcf of gas and 870,000 bbl of oil during 4 years.

John P. DesBarres, Transco Energy chairman, president, and chief executive officer, said the deal will increase to $200 million the total revenue Transco has received from sales of nonessential, noncore assets.

"Asset sales, nonbank financings, litigation settlements, and steps to reduce costs have all been completed on time and in line with the goals we set," DesBarres said. "Debt financings closed in the past 2 weeks assure we can comfortably fund capital requirements and complete our strategic plan on our terms."

As a result of the sale to Forest, Transco estimates it will record an after tax charge to second quarter earnings of about $35 million.

Transco will use proceeds from the sale to retire debt.

DAKALB SALE

Of the decision to discontinue most of its U.S. operations, Dekalb Executive Vice Pres. Chris Hardesty said, "It had proven impossible to reduce U.S. finding costs enough to generate reasonable rates of returns on investment for ourselves and our shareholders."

Dekalb plans to continue exploration and production of properties in Canada and of a small operation based in Bakersfield, Calif.

At yearend 1991, Dekalb's 61.2 million bbl of oil equivalent (BOE) Canadian reserves accounted for more than 70% of reserves company-wide. Canadian operations generated $40.4 million in 1991 about 43% of Dekalb's revenue that year.

Along with sales in late June of leases in North Dakota to Berco Resources Inc. and Central Resources Inc., both of Denver, and a 5% interest in Natural Gas Clearinghouse, Houston, earlier this year, the deal with Louis Dreyfus raised to $121 million the gross proceeds and other considerations Dekalb has received from the sale of U.S. assets.

The sale to Berco and associates covered 62 gross, or 34 net, wells in six Williston basin fields in McKenzie, Williams, and Burke counties, N.D. Berco estimates reserves at 1.535 million BOE.

Among Berco's partners were EHS Inc., Rockne L. Mullens, and two Berco affiliates.

Dekalb has divested about 22.1 million BOE of reserves plus other assets and has assumed certain liabilities. Hardesty said a detailed breakout of assets involved in each sale will be listed in a proxy statement mailed to Dekalb shareholders late this summer.

In addition to production in California, Dekalb will retain some oil and gas interests in the Gulf of Mexico. Combined reserves of remaining Dekalb U.S. holdings amount to about 1.5 million BOE.

Hardesty said the company hopes to sell the leases in the gulf within the next 2-3 months. Dekalb will retain the California properties, which it will manage from Calgary.

Disposition of the U.S. properties will ring up a net charge of about $28 million to Dekalb's second quarter earnings. But Hardesty said the company still expects to book a second quarter operating profit.