XTO Energy of Fort Worth said Thursday it agreed to pay Southwestern Energy Co. $520 million for more than 55,000 acres of production and leases on properties in the Fayetteville Shale of Arkansas, where it drilled 11 wells last year and had been running one drilling rig.
The deal will boost XTO's holdings in the field, which is a shale gas formation similar to the Barnett Shale of North Texas, to more than 300,000 net acres, the company said. It intends to put four drilling rigs to work in the field this year and "at least six rigs in 2009."
Earlier this year XTO reported the purchase of 32,000 net acres in the field, which at the time gave it 240,000 net acres there.
Southwestern, based in Houston, is the largest player in the Fayetteville, with more than 900,000 net acres as of year's end. The company said the current production of the properties bought by XTO is 10.5 million cubic feet a day.
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XTO President Keith Hutton, in a prepared release, said "we expect the acreage, which is contiguous to our core development footprint, to hold resource potential in excess" of 1 trillion cubic feet of natural gas. "We expect proved reserves attributable to this acquisition to grow to 160 billion cubic feet this year and at least 325 billion cubic feet by year-end 2009."
The transaction is expected to close by May 5. It will be financed through the company's cash flow and also the issuance of commercial paper, a form of short-term corporate borrowing.