2008-09-02-2008-04-03-2008-05-08

Purchased properties, gathering infrastructure, 55,631 net acres in AR Fayetteville shale, gaining 10.5 MMcfe/d.

XTO Energy Inc., Fort Worth, (NYSE: XTO) has closed its acquisition of producing properties, leasehold acreage and gathering infrastructure in the Arkansas Fayetteville shale from Southwestern Energy Co., Houston, (NYSE: SWN) for approximately $518 million in cash. The assets include 55,631 net acres with production of approximately 10.5 million cubic feet per day. The acreage is contiguous to XTO's core Fayetteville holdings and expands its position in the play to more than 300,000 net acres. The acreage represents approximately 6% of Southwestern's 906,700 net acres in the play and is in the southeastern portion of the company's focus area. XTO president Keith A. Hutton says, "Given our engineering assessment, we expect the acreage…to hold resource potential in excess of 1 trillion cubic feet equivalent. With the pipeline infrastructure already in place, our immediate plans include using four drilling rigs in 2008 and at least six rigs in 2009. We expect proved reserves attributable to this acquisition to grow to 160 billion cubic feet equivalent this year and at least 325 billion equivalent by year-end 2009." Southwestern president and chief executive Harold M. Korell says, "The sale of this acreage is in keeping with our focus on present value and our strategy of rationalizing our assets to fund our capital program. Results have been improving in recent quarters in the Fayetteville shale project, our James lime drilling looks promising, and we are now drilling our first Marcellus shale test. "This sale, along with our planned utility and potential Permian sales, will meet our 2008 capital needs and position us well as we move into 2009." The acquisition was funded by proceeds from the April 2008 issuance of $2 billion of senior notes. Merrill Lynch was advisor to Southwestern. Morgan Stanley Research reports the deal appears to be win-win. "Southwestern addresses a funding need by present valuing well-into-the-future reserves; XTO expands a core position that it will now accelerate. "Using 80-acre spacing, a 2.25 billion cubic feet gross estimated ultimate recovery per well, and a $3 million gross well cost, we estimate XTO accreted about $1 (per share) or approximately $500 million in equity value. This also assumes 75% working interest, 85% net revenue interest and an 8% discount rate."