?XTO Energy Inc., Fort Worth, Texas, (NYSE: XTO) plans to acquire privately held Dallas-based Hunt Petroleum Corp. and associated entities for $4.186 billion.
XTO will pay $2.6 billion in cash and 23.5 million shares valued at approximately $1.6 billion, or $67.50 per share.
XTO estimates proved reserves to be 1.052 trillion cu. ft. of gas equivalent (62% proved developed). Production is 197 million cu. ft. of gas, 8,500 bbl. of oil and 2,300 bbl. of gas liquids


The acquired properties are primarily concentrated in XTO’s eastern region including East Texas, central and northern Louisiana, representing 70% of Hunt reserves. Another 28% of the reserves, both onshore and offshore, are along the Gulf Coast of Texas, Louisiana, Mississippi and Alabama.
Nonoperated interests, reflecting more than 300,000 net acres of potential in the North Sea and the balance of proved reserves, will also be conveyed in the deal. XTO will also gain an additional 15,000 net acres of leasehold in the Bakken shale region of North Dakota.
Bob R. Simpson, XTO chairman and chief executive, says, “With the quality of these assets and the strong energy prices, this transaction reflects a defining moment in building our company’s future…They are a natural complement to our operations. Given our expertise and track record, our team already recognizes tremendous upside potential.”


The deal is “history making” for XTO, says Simpson, and should generate more than $1.2 billion in cash flow next year.
XTO president Keith A. Hutton says, “Simply put, the majority of these properties equate to a super-charged bolt-on for XTO. With our knowledge of these assets, we already see the potential to realize more than twice the allocated reserves.”
XTO has identified “hundreds of locations” to expand recovery and access multi-pay targets including the Pettit, Rodessa, Travis Peak, Cotton Valley and Bossier formations, he says.


In the Freestone Trend, he says, several fields are primed for infill development while specific acreage offsets XTO’s Gail King lease where it has recently completed a horizontal Cotton Valley Lime well at 21 million cubic feet per day. Further east, the acquired leasehold includes positions in the emerging Haynesville shale and James Lime horizontal plays.


“Along the Gulf Coast, both onshore and offshore, we are acquiring many high-profile producing properties and acreage which includes ownership in Mobile Bay Field off Alabama,” Hutton says. “Our organization, coupled with the talent and experience of the Hunt team, will assess the asset base for further development, continuing operations and other potential opportunities.”


He says the economic strength of the portfolio will allow XTO to grow the eastern region production by 15% per year with 35% of its cash flow and hold the Gulf Coast and offshore production volumes flat with about 30% of its cash flow.


Simpson adds, “All told, these legacy properties were discovered, acquired and developed over many decades. They have yielded robust production, reserves and income for private family interests. Now in XTO’s hands, we plan to accelerate the activities and know that the assets will achieve even more.”
The majority of the acquired properties, representing 48% of daily production and 114 producing fields, are in XTO’s eastern region of operations. In the Gulf Coast and offshore regions, production equals about 48% of the total volumes and is focused in five dominant properties offshore and six significant onshore fields. The balance of the production is in the North Sea. Total acreage for both the producing properties and undeveloped leasehold is 919,409 net acres.
The company has hedged 100 million cu. ft. per day of gas production for 28 months at a Nymex price of $11.08 per thousand cu. ft.
The acquisition is scheduled to close by Sept. 3.


Hunt Petroleum is an 80-year-old, private franchise founded on long-lived legacy properties.
Funding of the cash portion of the deal will be provided through a combination of cash flow, commercial paper and debt capital-market transactions. The number of shares of XTO common stock is not subject to adjustment.


The deal is the result of a process initiated by the boards of both Hunt Petroleum and The Hassie Cos. at the end of last year. Goldman Sachs is financial advisor to Hunt and marketed both Hunt Petroleum and Hassie Cos. simultaneously. Hunt’s legal counsel was Jones Day. Tristone Capital LLC provided advisory and technical assistance to Hunt. Energy Spectrum Advisors Inc. is financial advisor to The Hassie Companies. The Hassie board was advised by Haynes and Boone.
XTO operates in Texas, New Mexico, Arkansas, Oklahoma, Kansas, Wyoming, Colorado, Alaska, Utah, Louisiana, Mississippi and Montana. XTO has done or is in the process of doing more than $4.3 billion in deals in 2008, excluding the Hunt transaction, including a $1.85-billion acquisition from Headington Oil Co. LP in the Bakken shale play.
The deal is expected to close in the third quarter.

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