?XTO Energy Inc., Fort Worth, Texas, (NYSE: XTO) has closed its acquisition of producing properties and undeveloped acreage in the Bakken shale of Montana and North Dakota from privately held, Dallas-based Headington Oil Co. LP for a total deal value of $1.8 billion in cash and stock.


XTO paid $1.05 billion in cash and 11.7 million shares. The assets include 352,000 net acres in the Bar Trend and Nesson Anticline including producing properties in Elm Coulee Field in Montana. Estimated proved reserves are 68 million BOE (60% proved developed), according to XTO. Production is more than 10,000 BOE per day (88% oil).


Upside includes 215,000 net undeveloped acres. Associated gas production is Btu-rich and realizes a 30% premium to Nymex pricing.


In addition, the company plans to acquire 100,000 net undeveloped acres in the play and 400 bbl. per day of production for approximately $115 million from undisclosed parties in separate transactions.


Keith A. Hutton, XTO president, says, “With these deals, XTO now becomes a leading operator in perhaps the largest oil resource play in the nation, with more than 450,000 net acres. As with all our other acquisitions, our objective is to more than double the proved reserves through the application of cutting-edge technology. Given the opportunities in the Bakken through horizontal drilling, multiple stimulations and enhanced recovery, we anticipate the potential for even more.”


He says the company has four rigs running with plans to increase to six during first-half 2009. “Early well results are encouraging with a recent producer, completed in the Middle Bakken, flowing at a rate of 650 bbl. per day. At the same time, we have expansive coverage of the emerging Sanish-Three Forks play as established by production rates on offsetting acreage. XTO will soon spud its first horizontal well into this interval.”


Prior to the acquisition, the company planned to hedge 4,000 bbl. of oil per day for 30 months at $127 per bbl. The effective date is April 1.


XTO operates in Texas, New Mexico, Arkansas, Oklahoma, Kansas, Wyoming, Colorado, Alaska, Utah, Louisiana, Mississippi, Montana, North Dakota, Pennsylvania and West Virginia.


Standard & Poor’s Ratings Services reports that its BBB corporate rating on XTO is not affected. “On a pro forma basis, XTO’s debt leverage will be relatively high for the rating, with debt per BOE of total proved reserves at roughly $4. When using our conservative long-term pricing assumptions, we project pro forma funds from operations (FFO) to debt to be in the low 30% area,” S&P reports.

-Steve Toon

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