Exco Resources Inc., Dallas, (NYSE: XCO) plans to acquire producing oil and gas properties, acreage and other assets in Vernon and Ansley fields in Jackson Parish, La., from Anadarko Petroleum Corp. (NYSE: APC) for $1.6 billion in cash.

Exco will finance the acquisition with a new revolving credit facility and a bridge loan. Closing is expected in March.

The assets consist primarily of proved developed producing gas properties with net production of approximately 190 million cu. ft. equivalent per day from approximately 350 producing wells (96% operated) on 66,000 net acres. Six drilling rigs and four workover rigs are active in the fields. The acquisition also includes gathering systems, compression and treating plants.

The average working interest is 91.1% with an average 70.2% net revenue interest. The properties produce from Lower Cotton Valley. Proved reserves are some 466 billion cu. ft. equivalent (446 billion proved developed producing).

Jefferies Randall & Dewey marketed the assets and advised Anadarko.

Exco chief executive Doug Miller says, "The Vernon Field acquisition is an important strategic step in Exco's East Texas/North Louisiana-area development plan. The prolific cash flow from the Vernon and Ansley assets will be used to accelerate development of our approximately 1,100 drilling locations in the area and will also produce accelerated activity on our undeveloped leasehold, which will total approximately 85,000 net acres."

In East Texas/North Louisiana, with the Vernon and Ansley assets, Exco will have some 300 million cu. ft. equivalent per day of production and more than 1 trillion equivalent of proved reserves. Also, it will have some 226,000 net developed and undeveloped acres.

Company-wide daily production, including the Vernon and Ansley assets, will approach some 400 million equivalent per day and total proved reserves, 1.8 trillion equivalent.

Anadarko chairman, president and CEO Jim Hackett says he is pleased with the price. "These fields have been great assets for the company. However, the fields have reached the stage in their development cycle where it makes sense for us to monetize them, reduce leverage and focus on other attractive opportunities in our portfolio."

Standard & Poor's Ratings Services credit analyst Jeffrey Morrison put Exco on CreditWatch with negative implications. "The negative CreditWatch listing reflects our concern over the possible resulting high debt burden, which could weaken Exco's credit measures to a level inconsistent with expectations for the current rating," says S&P.

"In addition, we remain concerned about management's aggressive growth strategy and its ability to execute a financing plan that will reduce debt from pro forma levels...."

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