Exco Resources to buy part of Southwestern Energy assets for $355 mln

June 17, 2010 9:02 AM EDT

Oil and natural gas explorer Exco Resources Inc. has agreed to buy part of Haynesville and Bossier shale properties in East Texas for about $355 million from Southwestern Energy Co.

The properties to be acquired by Exco are located within the area of mutual interest established by the existing East Texas/North Louisiana joint venture with UK gas producer BG Group Plc, which will have the opportunity to purchase 50 percent of this acquisition.

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"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," Dallas, Texas-based Exco said.

Exco said the purchase will increase its interest in over 900 gross drilling locations. The assets include producing properties with current gross production of more than 51 million cubic feet per day (Mmcf/d) from 9 producing wells and about 20,000 net acres prospective for the Haynesville and Bossier shales.

"We will develop these assets with the same rigs and development plan and utilize the same infrastructure we will be building to realize the value in our existing Shelby Trough acreage," Exco's chief executive Douglas Miller said.

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The deal is expected to close in the second quarter of 2010.

Exco's operations are focused in key North American oil and natural gas areas including Appalachia, East Texas, North Louisiana, Mid-Continent, Permian, and the Rockies.

Earlier this month, Exco closed its Appalachian joint venture with BG Group. The total purchase price paid by BG Group to Exco at the closing was $835.2 million.

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

Southwestern Energy’s operations are primarily focused on the Fayetteville Shale, an unconventional reservoir located in the Arkoma Basin in Arkansas. It conducts both conventional and unconventional operations in East Texas primarily focusing on the Cotton Valley, James Lime, Pettet, Haynesville Shale and Middle Bossier formations.

Southwestern has retained the drilling and producing rights covering all other depths in the acreage, including its current James Lime and Pettet drilling programs, it said on Wednesday.

Exco shares, which ended Wednesday's regular trading session at $18.97, fell about 2 percent to $18.56 in after-market trade. Southwestern shares closed at $44.68, down 0.69 percent.

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