Dominion sells oil, gas assets in deals totaling $6.5 billion

Loews Corp. and XTO Energy Inc. agreed to buy certain oil and natural gas producing properties in two separate deals from Dominion Resources Inc. for a total of $6.5 billion.

Jun 4th, 2007

By OGJ editors
HOUSTON, June 4 -- Loews Corp. and XTO Energy Inc. agreed to buy certain oil and natural gas producing properties in two separate deals from Dominion Resources Inc. for a total of $6.5 billion.

Loews, a conglomerate based in New York, will pay $4.025 billion for estimated proved reserves of 2.5 tcf of gas. XTO agreed to pay $2.5 billion for estimated proved reserves of 1 tcf of gas. The sales are expected to close in August.

Last year Dominion, an electric and gas utility based in Richmond, Va., announced plans to divest its E&P operations except for 1 tcf of estimated proved reserves in the Appalachian basin (OGJ Online, Nov. 1, 2006).

In April Eni Petroleum Co. Inc. agreed to buy Dominion's oil and gas interests in the Gulf of Mexico for $4.8 billion. In May, Paramount Energy Trust and Baytex Energy Trust plan to buy Dominion's Canadian assets in two separate deals for a total of $583 million. Paramount and Baytex are both based in Calgary.

Loews said it plans to buy Dominion's operations in the Permian basin in Texas, the Antrim shale in Michigan, and the Black Warrior basin in Alabama.

XTO plans to acquire 542,000 net acres of Dominion leases. About 235,000 acres are undeveloped property in the Rocky Mountains, the San Juan basin, and South Texas. The acquisition will add 200 MMcfd of gas production.

Dominion also announced a process to sell its Midcontinent operations, primarily in Oklahoma, that is scheduled to begin in July. As of Dec. 31, 2006, these operations had estimated proved reserves of 780 bcf and probable reserves of 435 bcf. Last year's average production was 120 MMcfd.

XTO said 64% of the reserves that it is buying are proved developed and about 95% are gas.

Anticipated development costs for proved undeveloped reserves are $1.50/Mcf, and XTO plans to spend $200 million on these properties in 2007. The Fort Worth, Tex., company said it will operate 70% of these properties.

Bob R. Simpson, XTO chairman and chief executive officer, said the company increased its production growth guidance in 2007 to 15%, up from 10% as a result of the acquisition. XTO's initial production growth target for 2008 is 15%.

In the Rocky Mountains, XTO is acquiring 810 bcf of proved reserves and 326,000 net acres of leaseholds, primarily in Utah's Uinta basin. About 60% of that is developed. Net production is 26 MMcfd.

Assets include Natural Buttes gas field, Drunkards Wash coalbed methane field, and properties in the San Juan basin. XTO also is gaining entry into Jonah field in Wyoming.

In south Texas, XTO is acquiring 250 bcf of proved reserves and 216,000 net acres of leasehold, of which 50% is developed. Net production is 74 MMcfd. Production is primarily derived from the Wilcox Trend. The acquisition also provides production in the Frio and Vicksburg sand formations along the Gulf Coast.

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