Natural gas development in South Texas stands to advance with disclosure by Conoco Inc. that it will pay $900 million for significant additional gas reserves, production, and assets in the Lobo trend.
Conoco acquired the properties from GATX Corp.'s First Intercontinental Leasing Trust, which were formerly owned by TransTexas Gas Corp. unit, TransTexas Transmission Corp. (OGJ, May 5, 1997, p. 52).
Conoco, which already owned producing assets in the trend, will invest more than $1 billion during the next 5 years to develop more than 2.7 tcf of natural gas reserves.
Conoco's Lobo acquisition covers 215,000 acres, with 1,100 wells and proven reserves of 250 bcf. It also includes about 1,100 miles of gathering and transmission lines.
Conoco's plans
The new properties make Conoco the largest producer in the Lobo trend and the third-largest natural gas producer in Texas, it said.
Conoco said proved and estimated reserves in the newly acquired acreage are 1.8 tcf, which increases Conoco's U.S. reserves by 70% and moves the company closer to its goal of doubling the company's value by 2003, said R.E. McKee, executive vice president of worldwide exploration and production.
Within 6 years, Conoco plans to hike its output from the Lobo trend to 900 MMcfd from 165 MMcfd at present.
A development program includes acquiring new 3D seismic data and drilling 180 wells.
TransTexas' strategy
TransTexas sold the properties because they no longer fit into its strategic plans.
The company said sale proceeds will help reduce debt, as well as hone its focus on expansion of Bob West north and Fandango south fields in South Texas and North Dakota's Lodgepole play, where TransTexas hopes to speed development of discoveries (OGJ, May 26, 1997, p. 18).
The company believes development potential of promising exploration areas "far outweighs the benefits that could be achieved from extensive capital expenditures in the Lobo."
After the sale, TransTexas retains 400 bcf of reserves in South Texas. Production outside the Lobo trend generated more than half the company's output in first quarter 1997.
Copyright 1997 Oil & Gas Journal. All Rights Reserved.
