Houston-based W&T Offshore has entered into a purchase and sale agreement with ExxonMobil to acquire its interests in and operatorship of oil and gas producing properties in the eastern region of the Gulf of Mexico, offshore Alabama, and related onshore processing facilities for $200 million.
W&T said on Thursday that the deal includes working interests in nine GOM offshore producing fields and an onshore treating facility that are immediately adjacent to existing properties owned and operated by W&T.
The company also said that the agreement allows for significant synergies, consolidations and cost savings as W&T will become the largest operator in the area.
The agreement adds net proved reserves of 74 million barrels of oil equivalent (Boe) of which 99% are proved developed producing and 22% are liquids as of the effective date.
According to the company, the deal offers potential to add incremental reserves with little or no capital by consolidating operations and extending field life.
ExxonMobil produced approximately 19,800 net Boe per day from the acquired properties in the first quarter of 2019, of which 25% was liquids.
W&T also said that the transaction provides additional upside opportunities from potential future drilling locations and facility modifications.
Tracy W. Krohn, Chairman and Chief Executive Officer, stated, “We are pleased with this purchase of producing properties which meets all the criteria we have outlined in the past as necessary to drive increased shareholder value from acquisitions. These low decline assets are highly accretive, free cash flow positive, and adjacent to our current operations thereby providing us the opportunity to recognize increased scale, rationalize operations and capture cost efficiencies to further grow cash flow.
“In addition, we also have the opportunity for further growth in reserves from potential field life extensions and drilling and facility upgrade opportunities. We believe this acquisition, with its long-life reserves, production and infrastructure, complements our ongoing strategy to recognize value for our shareholders through drill bit success, effective risk and cost management, and joint venture partnership.”
The acquisition consists of working interests in nine shallow water producing fields and related operatorship in the Mobile Bay area and will expand W&T’s presence to become the largest operator in the area.
The purchase also includes ExxonMobil’s onshore treating facility which, along with the company’s existing treating facility, will allow for flexibility in processing the produced gas and allow for future consolidation of operations. The total purchase price is $200 million subject to customary post-effective date adjustments. The effective date is January 1, 2019, and the transaction is expected to close on or about August 30, 2019. The acquisition will be funded from W&T’s available cash on hand and revolving credit facility.
Total net proved reserves to be acquired are 74 million barrels of oil equivalent, of which 22% are liquids. The vast majority of the reserves are classified as proved developed producing.
Source: offshoreenergytoday.com