Exco Resources Inc., Dallas, (NYSE: XCO) and BG Group Plc (London: BG) have closed a joint venture forming a 50-50 operating company to develop Exco’s assets in Appalachia, specifically in the Marcellus shale play, for approximately $835.2 million.
The deal was originally announced for $950 million, consisting of $800 million in upfront cash and a $150-million drilling carry to be satisfied in 2011 and 2012.
BG has acquired assets involving membership interests in companies that hold 50% of Exco’s producing and nonproducing assets in the Appalachian Basin, primarily in Pennsylvania and West Virginia, and will increase its estimated net gas resources by 2.4 trillion standard cu. ft.
Exco was expected to receive approximately $2,905 per acre, based on 327,000 net acres, and $10,215 per acre in the Marcellus play, based on 93,000 net acres.
As of year-end 2009, the existing assets comprised 654,000 net acres, with approximately 186,000 prospective net acres in the Marcellus shale; net production of 35 million cu. ft. equivalent per day from primarily shallower conventional horizons; and roughly 265 billion cu. ft. equivalent of net proved reserves. Exco estimates the Marcellus position includes more than 5,000 undrilled locations.
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