CROSS TIMBERS STEPS UP PRODUCTION ACQUISITIONS

April 24, 1995
Cross Timbers Oil Co., an aggressive Fort Worth independent operator, is well ahead of its schedule for growth. Its latest move in that program is an agreement to buy gas producing leases, a gas gathering system, and a gas processing plant from Santa Fe Minerals Inc. for $130 million. The leases consist of mainly operated interests in sprawling Hugoton field of Kansas and Oklahoma. The price involves $100 million for production and the rest for gas gathering and processing assets.

Cross Timbers Oil Co., an aggressive Fort Worth independent operator, is well ahead of its schedule for growth.

Its latest move in that program is an agreement to buy gas producing leases, a gas gathering system, and a gas processing plant from Santa Fe Minerals Inc. for $130 million. The leases consist of mainly operated interests in sprawling Hugoton field of Kansas and Oklahoma.

The price involves $100 million for production and the rest for gas gathering and processing assets.

Board Chairman Jon Brumley said, "When Cross Timbers went public in 1993, we announced our goal of doubling cash flow and the value per share of our common stock within 5 years through acquisition of $250 million in properties. We are ahead of schedule, with $270 million in acquisitions made in just over 2 years."

Subject to certain conditions, Cross Timbers will purchase interests in 159,000 net acres in Texas County, Okla., and Seward, Stevens, Kearny, Haskell, Finney, and Grant counties, Kan. It will operate 283 of 381 wells acquired.

Production is mainly from the Permian Chase at about 2,700 ft.

Much of the Kansas portion of Hugoton has been infill drilled on 320-acre spacing. While the Oklahoma portion of the field is drilled on 640-acre spacing, Cross Timbers said, there is a potential for infill drilling upon regulatory approval.

Cross Timbers engineers estimate reserves attributable to the Santa Fe leases at 138 bcf of gas. Proved producing reserves account for more than 99% of reserve value.

Current production averages about 30 MMcfd. Direct production costs, excluding production and severance taxes, average 13/Mcf.

The acquired gathering system serves 360 producing wells through 330 miles of line flowing into the processing plant, which has a capacity of 60 MMcfd.

Cross Timbers now has more than 200 potential infill drillsites in Hugoton field, most of which will be subject to regulatory approval in Oklahoma. It earlier acquired Hugoton leases from Apache Corp. (OGJ, Mar. 13, p. 43).

WHAT'S NEXT

Cross Timbers plans to finance the Santa Fe trade through a credit facility with commercial banks led by its existing agent banks, Morgan Guaranty Trust Co. of New York and NationsBank of Texas.

Closing of the purchase, to be effective last Jan. 1, is expected about Aug. 1 Brumley said, "Having achieved our acquisition goal, our near-term efforts will focus on increasing cash flow through exploitation and development, fine tuning of our property portfolio, and debt reduction of at least $60 million over the next 18 months."

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