The South Texas region spotlighted here encompasses most of the southern portion of Texas, including more than 30 counties. Current production in the South Texas region is roughly 5 billion cubic feet equivalent (Bcfe) per day from approximately 23,500 active wells, 89% of which are gas.

The South Texas region is the seventh largest producing basin in the U.S. and holds proved reserves of 12.6 trillion cubic feet equivalent (Tcfe). This basin has the ninth-largest amount of proved reserves in the U.S. The South Texas region is characterized by deep tight-gas reservoirs with medium-life reserves.

The South Texas region is one of the most heavily explored regions in the U.S. and the majors continue to grow their positions there. The largest potential in the South Texas region is in deeper, over-pressured targets and step-outs to new fault blocks.

A renewed level of interest is evident in the region due to the potential for high initial production, improvement of 3-D seismic technology and improvement of fracture technology.

Operations. The majority of the activity in the South Texas region results from development drilling, recompletions and restimulations in the major producing fields.

Operational issues include: land that is often tied up and is controlled by a few individuals, making it difficult to assemble a large block of contiguous leases; most wells are vertical completions; wells are often deeper than 15,000 feet, requiring large, expensive fracture stimulation; and the basin requires intense technology focus.

Transaction activity. Transaction activity in the South Texas region has been dominated by small- to midcap independents. Nevertheless, during each of the past several years, at least one very significant transaction has taken place in the region.

In 2005, Shell Exploration & Production swapped into Total E&P's assets in a transaction valued at $735 million, according to energy-research firm John S. Herold Inc. In 2006, Edge Petroleum purchased assets from Smith Production for $320 million. Most recently, Crimson Exploration purchased $289 million of assets from Exco Resources in May 2007.

-Shaun Finnie (832-476-6407), David Cecil (713-437-5063) and Adrian Goodisman (713-437-5050)

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