In a deal with a subsidiary of investment banking group Lehman Brothers, El Paso paid approximately $62.5 million for a number of oil and natural gas properties in the Gulf of Mexico, South Texas, and the ArkLaTex regions.
Specifically, El Paso entered into the joint drilling venture with Lehman and a division of Nabors Industries Ltd in October 2003.
El Paso estimates proved reserves associated with the properties to be approximately 14.6 billion cubic feet equivalent. Approximately 73% of the reserves are natural gas, approximately 95% are classified as proved developed and 88% are proved developed producing. Incremental average daily production for the remainder of 2005 is estimated to be 23 million cubic feet equivalent. Hedges have been put in place for most of the expected volumes.
This acquisition is an attractive tactical step in our continuing efforts to reshape the production business, said Lisa Stewart, president of El Paso’s Production and Non-regulated Operations. We have acquired reserves that are short-lived but low risk. We already own an interest in the reserves, and we operate all 86 wells, which are in our core operating areas. Additionally, we have assured an attractive return through hedging.
