XTO Energy Inc., Fort Worth, (NYSE: XTO) will buy 150 onshore producing properties in seven states from ChevronTexaco Corp. for $1.1 billion, gaining proved reserves of 786 billion cu. ft. of gas equivalent (88% proved developed; 48% oil). Production is 88 million cu. ft. of gas and 14,000 bbl. of oil per day, with more than 90% of the total from assets in Texas and New Mexico. Overall, XTO will gain ChevronTexaco legacy assets in East Texas, South Texas, the Permian Basin, Midcontinent and the Rockies (coalbed methane). The purchase will be XTO's entrance to Rockies CBM and to South Texas. Development costs for the proved undeveloped reserves are estimated at $0.47 per thousand cu. ft. XTO will operate 67% of the assets. The analysts at Sterne, Agee & Leach calculate the cost of the deal at $1.40 per thousand cu. ft. of gas equivalent of proved reserves. "Before this acquisition XTO had a solid drilling inventory of three to four years, but with this transaction, it has effectively increased its drilling inventory to the end of the decade while buying relatively mature assets that help the company with decline curve management from existing production," the analysts report. This transaction should aid in XTO achieving 2004 production growth in the 28% to 30% range and 18% to 20% in 2005, they add. In the Permian Basin, XTO will gain 80 million BOE of proved reserves in 16 counties. Net production is about 11,500 bbl. of oil and 40 million cu. ft. of gas per day. Primary producing fields include Yates, Goldsmith, Eunice Monument, Fullerton and Puckett. In East Texas, XTO will gain 102 billion cu. ft. equivalent of proved reserves in Franklin, Freestone, Limestone and Anderson counties, Texas, and Claiborne Parish, La. Net production is about 13 million cu. ft. equivalent per day. Primary producing fields are Teague, Oletha, Bethel, Haynesville and New Hope. In the Rockies, XTO will gain 67 billion cu. ft. equivalent of proved reserves in the Buzzards Bench Field, Emery County, Utah. The property, in the Ferron sand and coal play, is an offset to the Drunkard's Wash Field and is currently producing about 12 million cu. ft. equivalent per day. In South Texas, XTO will gain 54 billion cu. ft. equivalent of proved reserves in nine counties with net production totaling 20 million cu. ft. equivalent per day. In the Midcontinent, XTO will gain 67 billion equivalent of proved reserves from 11 counties in Oklahoma and Texas. The properties produce 15 million cu. ft. equivalent per day. The remaining 16 billion cu. ft. equivalent of proved reserves and net production of 3 million cu. ft. equivalent per day are from various royalties and other miscellaneous properties. The deal may close in August and be retroeffective to Jan. 1. The deal brings XTO's acquisition announcements so far this year to nearly $1.8 billion. "Through hard work and persistence this year, we have forged together high-quality properties which are equivalent to acquiring a significant E&P company," says Bob R. Simpson, XTO chairman and chief executive. "By doing so, we have seized low-risk growth opportunities for our development programs, avoided the issues faced when acquiring whole companies and captured the full tax basis of the acquisition costs." Per BOE, XTO is paying a relatively high price-$8.76 including future development costs and purchase-price adjustments-but the price is consistent with recent acquisitions in the industry, Standard & Poor's credit-rating analysts report. ChevronTexaco vice chairman Peter Robertson commented, "This sale is significant. It is a key step in our drive to streamline our portfolio of assets to approximately 400 core fields that represent the vast majority of our long-term value in the United States and Canada. Furthermore, the transaction allows us to focus on maximizing and growing the value of our base business."