EXCO Resources, Inc. (NYSE:XCO) (“EXCO”) today announced that it has
reached a definitive agreement with BG Group plc (LSE:BG.L) (“BG Group”)
for the joint development and operation of EXCO’s Haynesville shale and
certain other related natural gas assets located in East Texas/North
Louisiana. In addition, EXCO and BG Group have reached an agreement in
principle regarding the joint development and operation of EXCO’s
midstream assets in East Texas/North Louisiana.
Pursuant to a purchase and sale agreement (“PSA”), EXCO will sell BG
Group a 50% interest in its producing and nonproducing assets in a large
area of mutual interest (“AMI”) which encompasses most of EXCO’s
holdings in East Texas/North Louisiana, excluding the Vernon Field in
Jackson Parish, Louisiana, the Redland Field in Bossier and Webster
Parishes, Louisiana and the Gladewater and Overton Fields in Gregg, Rusk
and Smith Counties in East Texas. The parties will enter into a joint
development agreement at closing with respect to the Haynesville,
Bossier and other deep horizons as well as the Cotton Valley, Hosston
and other shallow horizons. EXCO will continue serving as operator of
the joint development subject to oversight from a Joint Development
Operating Committee.
EXCO and BG Group will each own 50% of the acreage, production and
reserves within the AMI. The existing assets within the AMI include
approximately 120,000 net acres with approximately 65,000 net acres in
East Texas and 55,000 net acres in Louisiana. Approximately 84,000 net
acres are prospective for Haynesville shale development, and most of
this acreage is in the core Haynesville shale areas of DeSoto and Caddo
Parishes in Louisiana and Harrison County, Texas. Also included is net
production of approximately 95 Mmcfe/d from the Cotton Valley and other
shallower horizons and approximately 60 Mmcf/d from the Haynesville
shale. As of December 31, 2008, the Cotton Valley and other shallow
rights included approximately 414 Bcfe of net proved reserves and
approximately 445 Bcfe of net probable and possible reserves, based on
year-end SEC pricing. The Haynesville/Bossier shale acreage is under
development, and EXCO estimates that its current acreage position, most
of which is held by shallow production, includes over 1,600 undrilled
Haynesville locations containing net potential reserves of 4 to 6 Tcfe,
with significant additional potential in the Bossier shale. EXCO and BG
Group plan an aggressive development program, particularly in the
Haynesville shale, for the remainder of 2009 and in future years. EXCO’s
Haynesville shale results to date have been outstanding as 8 horizontal
Haynesville wells have been drilled and completed in DeSoto Parish with
average gross initial production rates in excess of 23 Mmcf/d on
restricted chokes. These well results will allow booking a significant
amount of proved reserves. The full year 2009 budget calls for a minimum
of 34 horizontal Haynesville wells to be drilled, 27 of which will be
operated by EXCO.
EXCO will receive $655 million in cash at closing pursuant to the
upstream joint development transaction, subject to customary closing
adjustments.
