Wednesday, June 16, 2010

EXCO to Buy Majority of Southwestern Energy's Haynesville Acreage

EXCO Resources announced today that it has acquired 20,063 acres in Texas prospective for the Haynesville/Middle Bossier Shales from Southwestern Energy in a transaction valued at approximately $355 million (view Southwestern's press release).  The acquisition also includes a few producing wells and gathering assets.  BG Group, with whom EXCO has partnered in the Haynesville Shale, has the opportunity to participate as a 50% owner in the deal.

Southwestern is selling EXCO 20,063 net acres in San Augustine, Shelby and Nacogdoches Counties. Southwestern retained the shallower rights for formations such as the Pettet and James Lime, and it will retain another 10,500 acres prospective for the Haynesville/Mid-Bossier Shales.  The acreage sold to EXCO is located in the Shelby Trough, which runs from the southeast corner of DeSoto Parish, LA through southern Shelby, northern San Augustine and eastern Nacogdoches Counties.  The Shelby Trough has become the hot spot on the Texas side.

The price implies a value of $17,694 per acre, but it is hard to disaggregate the value of the gathering assets from the total consideration.  Still, that's a pretty strong valuation.  EXCO has been very busy of late. Along with the BG deal, the company has acquired Common Resources, LLC, another successful big player on the Texas side of the play. 

The transaction should be good for the landowners.  Southwestern never seemed that interested in drilling its Haynesville acreage, as the company focused most of its attention on the Fayetteville Shale, where it has a dominant position.

I find it interesting that most M&A transactions have involved companies selling from a position of relative strength.  More than a year ago when natural gas prices plummeted, there was speculation that there would be a bottom feeding acquisition frenzy.  That never materialized.  Companies generally held on and waited until the market improved to sell.  Good for them.  Good for everyone, I suppose.

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