2010-08-31-2010-08-23

To acquire Permian Basin assets in the Wolfberry trend comprising 8,700 net acres.

Energen Resources Corp., the oil and gas E&P company of Energen Corp., Birmingham, Ala. (NYSE: EGN) plans to acquire Permian Basin assets in the Wolfberry trend from an undisclosed seller for $185 million, plus standard closing adjustments.

The bulk of the assets, comprising 8,700 net acres, is in Martin County, Texas, in a prime location for Wolfberry development. The West Texas Permian Basin is one of the oldest producing oil basins in the United States and the company's second-largest area of operation. The acquisition includes 19 producing wells, 142 proved undeveloped (PUD) locations and approximately 50 probable locations identified. It is 100% operated.

Estimated proved reserves total 18 million barrels of oil equivalents (MMBOE), of which 16 MMBOE (89%) are PUDs. Sweet oil represents 65% of total proved reserves; natural gas liquids (NGL) comprise 22%; and natural gas makes up the remaining 13%. The acquisition also includes an estimated 6.2 MMBOE of probable reserves.

Energen estimates that future development costs associated with proved and probable reserves will be approximately $325 million (less estimated plug-and-abandonment costs). This brings the all-in acquisition cost to approximately $21.11 per barrel of oil equivalents (BOE).

Energen chairman and chief executive James McManus says, "This acquisition features high-quality drilling opportunities across a sizeable, contiguous acreage position in the heart of the Wolfberry trend in the Permian Basin. We are drilling more than 30 Wolfberry wells on our existing properties in 2010, and look forward to expanding our activity in this exciting oil play."

McManus adds that Energen currently has an "outstanding" balance sheet and is generating "superior cash flows."

To help lock-in returns through 2014, Energen has hedged 78% of its estimated oil production associated with this acquisition over that four-year period.

The deal is expected to close by Sept. 30. The effective date is Sept. 1.