Southwestern Divests Texas Assets – Analyst Blog

Houston-based Southwestern Energy Company (SWN) announced the sale of $355 million worth of its assets in Haynesville and Middle Bossier shale to an oil and natural gas explorer, EXCO Resources Inc. (XCO). The deal provides EXCO approximately 20,063 net acres for production, which includes certain oil and gas leases, wells and gathering equipment held by Southwestern Energy in East Texas.

 

The acreage, with a current production capacity of 17 million cubic feet per day (MMcf/d) from approximately 9 producing wells and 2009 net proved reserves of $31 billion cubic feet equivalent (Bcfe), is located in the Shelby Trough, San Augustine and Nacogdoches Counties, Texas.

 

The company added that the area is located in the mutual interest established by EXCO’s joint venture with the British gas producer, BG Group. Consequently, BG Group will have the opportunity to purchase 50% of this acquisition. Assuming BG Group intends to participate in the acquisition, the development of common acreage would be administered by the East Texas/North Louisiana joint venture with BG Group.

 

Southwestern continues to hold 10,500 net acres after the sale and intends to carry on its East Texas drilling program with initial production expected in the fourth quarter of 2010. The deal is expected to close on June 30, 2010.

 

Following the divestment agreement with EXCO, the company lowered this year’s capital expenditure for its East Texas operations to $185 million from $230 million. The new guidance includes approximately 35−45 wells compared with the previous well count of 50−60.

 

Southwestern Energy engages in the exploration, development and production of natural gas and crude oil in the United States and continues to exhibit best-in-class growth in the Fayetteville Shale play with low operating costs, and is carrying its process to new plays, including the potentially higher impacting East Texas Shale and the Marcellus Shale plays.

 

We remain optimistic on the Northern Arkansas’ Fayetteville Shale, which has given the company one of the highest quality natural gas discoveries in North America in recent years.