BG Group announced an alliance with EXCO Resources, Inc., a US oil and natural gas exploration and production company.
Key points
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.
