W&T Offshore announced on Thursday that it has entered into a purchase and sale agreement with ExxonMobil to acquire their interests in and operatorship of oil and gas producing properties in the eastern region of the Gulf of Mexico, offshore Alabama, and related onshore processing facilities for $200 million.
The transaction includes working interests in nine shallow water producing fields, making W&T the largest operator in the area. W&T said it adds net proved reserves of 74 million barrels of oil equivalent (boe), of which 99% are proved developed producing and 22% are liquids.Production from the acquired properties in the first quarter of 2019 was approximately 19,800 net boe per day (25% liquids), it said.
Also included is an onshore treating facility immediately adjacent to existing properties owned and operated by W&T.
The company said it sees additional upside opportunities from potential future drilling locations and facility modifications, as well as potential to add incremental reserves with little or no capital by consolidating operations and extending field life.
Tracy W. Krohn, Chairman and Chief Executive Officer, said, "These low decline assets are highly accretive, free cash flow positive, and adjacent to our current operations thereby providing us the opportunity to recognize increased scale, rationalize operations and capture cost efficiencies to further grow cash flow.
"We also have the opportunity for further growth in reserves from potential field life extensions and drilling and facility upgrade opportunities. We believe this acquisition, with its long-life reserves, production and infrastructure, complements our ongoing strategy to recognize value for our shareholders through drill bit success, effective risk and cost management, and joint venture partnership."
The effective date is January 1, 2019, and the transaction is expected to close on or about August 30, 2019.
The acquisition will be funded from W&T's available cash on hand and revolving credit facility.