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BG Group today announced an alliance with EXCO Resources, Inc. (NYSE:XCO),
a US oil and natural gas exploration and production company.
Upstream
- BG Group acquires a 50%
interest in 120 000 net acres in east Texas
and north Louisiana.
Of these, 84 000 net acres cover the Haynesville shale gas
formation, a substantial proportion of which lies within the
prolific Harrison County, Texas and DeSoto and Caddo Parishes,
Louisiana. EXCO has completed eight horizontal wells in DeSoto
Parish with an average initial production rate in excess of 23
million standard cubic feet per day (mmscfd).
- The acquisition adds 2.6
trillion standard cubic feet (tcf) to BG Group's resources, with
current net production of 78 mmscfd, anticipated to increase to some
250 mmscfd in 2012, net to BG Group.
- A consideration of US$1
055m equates to approximately US$0.40 per thousand standard cubic
feet (mscf). This comprises US$655m on completion plus US$400m to be
paid as a carry of 75% of EXCO's future costs to develop the
Haynesville shale gas.
- Substantial potential for
growth in resources through further exploration and appraisal.
- BG Group and EXCO will
enter into a joint development agreement to co-operate in the
further development and production of shale gas in east Texas and
north Louisiana.
Midstream
- Agreement to negotiate to
acquire a 50% interest in related and complementary EXCO
gas-gathering and transportation assets for US$249m.
BG Group Chief
Executive Frank Chapman said: "This alliance brings material new
resources and supply to our existing US business at a competitive price
and in a prime location at the heart of the world's largest gas market. These
domestic exploration and production activities yield strong synergies
with the Group's established LNG import and 3.5 billion standard cubic
feet per day US gas marketing business. Furthermore, the transaction
increases BG Group's exposure to long-term unconventional gas resources
and skills. We look forward to working with EXCO on this strategic
partnership to deliver the significant growth potential of these
assets."
The Haynesville shale
gas interests are being acquired for a consideration of approximately
US$19 000 per acre.
The upstream
acquisition and the joint development agreement are conditional on the
acquisition by BG Group of the 50% interest in EXCO's midstream assets
and relevant regulatory approvals. EXCO will operate the jointly held
upstream acreage.
The total
consideration for the midstream assets, which will be operated by a newly
incorporated, jointly owned midstream company, has been agreed at
US$249m. Both transactions have an economic effective date of 1 January
2009.
The midstream
business includes the EXCO-owned TALCO and TGG gas-gathering and
intrastate pipeline systems. These systems deliver EXCO's and other
companies' production to markets in Louisiana and Texas and are connected
to major intrastate and interstate gas transmission pipelines serving
markets across the Midwest and Eastern US.
-ends-
BG Group
BG Group plc (LSE: BG.L) is a world leader in natural gas, with a
strategy focused on connecting competitively-priced resources to
specific, high-value markets. Active in 27 countries on five continents,
BG Group has a broad portfolio of exploration and production, Liquefied
Natural Gas (LNG), transmission and distribution and power generation
business interests. It combines a deep understanding of gas markets with
a proven track record in finding and commercialising reserves. For
further information visit: www.bg-group.com
EXCO
EXCO is an oil and natural gas exploration, exploitation, development and
production company headquartered in Dallas, Texas with principal
operations in east Texas, north Louisiana, Appalachia, west Texas and the
mid-continent areas of the US.
Upstream Assets
The acreage to be acquired includes the Oakhill, Holly, Kingston,
Caspiana, Danville, Longwood/Waskom, Carthage and Minden fields and
excludes EXCO's Vernon, Redlands, Gladewater and Overton fields.
Haynesville
shale
The Haynesville shale gas play extends across parts of east Texas and
north Louisiana, covering approximately 12 950 square kilometres. EXCO's
leasehold portfolio comprises approximately 84 000 net acres that are
prospective or producing from the Haynesville. EXCO has drilled and
completed nine Haynesville horizontal wells to date. Eight of
these have been drilled in DeSoto Parish and have achieved an average
initial production rate in excess of 23 mmscfd.
Cotton Valley tight gas sands
The Cotton Valley tight gas sands is a mature play covering large
portions of east Texas and north Louisiana. Cotton Valley operations are
characterised by long-life proved developed reserves and high drilling
success rates. The Cotton Valley overlies the Bossier shale at depths of
approximately 2 133 metres to 2 743 metres. EXCO's net Cotton Valley
acreage is approximately 120 000 leasehold acres. As of December 31 2008,
EXCO reported that the Cotton Valley and other shallow rights included
approximately 414 billion cubic feet equivalent (bcfe) of net proved
reserves and approximately 445 bcfe of net probable and possible
reserves, based on year-end SEC pricing.
Bossier shale
The Bossier shale is a gas bearing shale that directly overlies the
Haynesville. Recent successful completions in this interval by operators
in east Texas and north Louisiana suggest that this gas rich interval may
also be commercially viable with improvements in gas price or advances in
drilling and completion technology.
Midstream Assets
EXCO currently has in excess of 700 miles of pipeline and gathering
assets in the area and is constructing a 29 mile, 36" diameter
header system to transport its Haynesville gas production. Throughput in
the midstream business to be contributed to the joint venture is
approximately 440 mmscfd of which approximately 50% is EXCO gas and 50%
is third party gas.
Shale Gas
Shale gas is natural gas stored in organic rich rocks such as
dark-coloured shale, interbedded with layers of shaley siltstone and
sandstone. Shale can be the source, reservoir and the seal for the gas.
Shale gas plays are classified as a "continuous" type gas
accumulations extending throughout large areas, typically with low
permeability and perhaps natural fractures.
Shale gas is considered an unconventional source as the gas may be
attached to or "adsorbed" onto organic matter. The gas is
contained in difficult-to-produce reservoirs that require special
horizontal completions and fracture stimulation techniques to achieve
economic production. Shale gas may also be contained in thin porous silt,
sand and calcite beds interbedded in the shale.
Shale gas has become an increasingly important source of natural gas
in the United States over the past decade.
Advisors
BG Group is being advised by Deutsche Bank.
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3110
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929 3025
There are matters discussed in this media information that are
forward looking statements. Such statements are only predictions and
actual events or results may differ materially. For a discussion of
important factors which could cause actual results to differ from the
forward looking statements, refer to BG Group's annual report and
accounts for the year ended 31 December 2008. BG Group does not undertake
any obligation to update publicly, or revise, forward looking statements,
whether as a result of new information, future events or otherwise,
except to the extent legally required.
Copyright � 2009 BG Group, All rights reserved.
BG Group plc, 100
Thames Valley Park, Reading, Berkshire, RG6 1PT
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VAT: GB 232177091
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