EXCO acquires Haynesville, Bossier Shale assets from Southwestern for $355M

Oil and natural gas company EXCO Resources Inc. has agreed to purchase certain Haynesville and Bossier shales properties from Southwestern Energy Co. for $355 million. 

The properties include producing assets, gathering lines and acreage in Shelby, San Augustine and Nacogdoches Counties, Texas and are located within the area of mutual interest established by the existing East Texas/North Louisiana joint venture with BG Group plc. BG Group has the opportunity to purchase 50% of this acquisition.

Nearly all of the interest to be acquired is incremental to the interest in the producing assets, gathering lines and acreage acquired by EXCO and BG Group through the acquisition of Common Resources LLC, which closed May 14, 2010. 

The acquisition of these assets will increase EXCO's interest in over 900 gross drilling locations. The assets include producing properties with current gross production of more than 51 Mmcf per day (17 Mmcf per day net) from 9 producing wells and approximately 20,000 net acres prospective for the Haynesville and Bossier shales. Assuming BG Group participates in the acquisition, EXCO and BG Group will each double their working and net revenue interests in much of the Common acreage.

The acreage is situated in the Shelby Trough formation that runs from the southeast corner of DeSoto Parish, Louisiana through southern Shelby, northern San Augustine and eastern Nacogdoches Counties, Texas. EXCO's first operated well in this area had an initial production rate of 22.1 Mmcf per day.

Assuming BG Group elects to participate, the development of these assets would be governed by the East Texas/North Louisiana joint venture with BG Group. EXCO's net acquisition price will be financed with borrowings under its credit agreement. 

The acquisition is expected to close on June 30, 2010.

Southwestern continues East Texas drilling
Houston-based Southwestern Energy, ranked No. 24 by total assets for the quarter ending Dec. 31, 2009 in OGFJ's May issue OGJ150 Quarterly, retained the drilling and producing rights covering all other depths in the acreage, including the company’s current James Lime and Pettet drilling programs.

Southwestern will continue an active drilling program in East Texas, which includes approximately 10,500 additional net acres under which it believes that the Haynesville and Middle Bossier Shale intervals are prospective. The company is currently drilling its second Haynesville/Bossier well in this acreage and expects initial production in the fourth quarter upon the completion of pipeline infrastructure.

As a result of the sale, Southwestern has revised its capital program in East Texas for calendar year 2010 to approximately $185 million, which includes participating in approximately 35 to 45 gross wells, down from $230 million, which had included 50 to 60 wells.

In after-market trading Wedensday, EXCO shales fell roughly 2% from its regular trading session close at $18.97. Southwestern shares closed at $44.68, down 0.69%.

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