Houston Exploration Completes Sale of Louisiana Offshore Assets
June 01 2006 - 3:30PM
PR Newswire (US)
HOUSTON, June 1 /PRNewswire-FirstCall/ -- The Houston Exploration
Company (NYSE:THX) today reported that it has completed the
previously announced sale of substantially all of the Louisiana
portion of its Gulf of Mexico assets for a gross purchase price of
$590 million. At year-end 2005, the proved reserves associated with
these assets were estimated at 186.1 billion cubic feet of natural
gas equivalent (Bcfe). Wachovia Securities served as the financial
adviser to the company in connection with the transaction. "The
closing of this transaction represents a significant step forward
in our ongoing efforts to restructure the company as a pure onshore
operator," stated William G. Hargett, chairman, president and chief
executive officer. "Looking ahead, our restructuring efforts will
continue to be focused on deploying capital in a manner most
beneficial to all Houston Exploration shareholders. To that end, we
are pursuing a balanced plan that will include the continued
execution of our share repurchase program, the development of our
existing assets, the acquisition of additional properties in U.S.
onshore basins that meet our strategic, operational and financial
criteria, and the repayment of outstanding bank debt." The net cash
proceeds received from the sale totaled approximately $530.8
million after customary closing items, including the exercise of
certain preferential purchase rights and the preliminary adjustment
for operations related to the properties after January 1, 2006, the
effective date of the transaction. Of these net cash proceeds,
$314.2 million was paid directly to a qualified intermediary to
facilitate like-kind exchange transactions under Section 1031 of
the Internal Revenue Code, and substantially all of the $216.6
million balance, associated with the properties sold outside of the
like-kind exchange arrangement, was used to repay outstanding
borrowings under the company's revolving credit facility. In
connection with the sale, the company's borrowing base under its
revolving credit facility has been reduced from $550 million to
$500 million. Also in connection with the sale, the company expects
to complete the following transactions during the second and third
quarters: * The payment of a net profits interest to a predecessor
owner in certain of the sale properties. The amount of the payment
is expected to be approximately $30 million; and * The unwinding of
existing gas hedges totaling an equivalent of up to 80,000 MMBtu
per day for the remainder of 2006. Based on current gas prices, the
cost of the unwind is estimated to be $10 million to $20 million.
Update to Ongoing Restructuring Activities The following is an
update to the ongoing restructuring activities and related
initiatives that have been completed to date: * November 8, 2005 --
Houston Exploration announced its intent to execute a strategic
shift in its operations by pursuing the sale of its offshore
operations and becoming a concentrated onshore U.S. gas producer.
As part of this plan, the company also announced that its board had
authorized a discretionary common stock repurchase program of up to
$200 million. * February 28, 2006 -- Houston Exploration signed an
agreement to sell the Texas portion of its Gulf of Mexico assets,
including proved reserves estimated at 58.5 Bcfe, for a gross
purchase price of approximately $220 million. * March 31, 2006 --
Houston Exploration completed the sale of the Texas portion of its
Gulf of Mexico assets. The majority of the $191 million of net cash
proceeds received by the company were used to repay bank debt
incurred in connection with a December 2005 acquisition of proved
reserves in South Texas in a transaction intended to qualify for
like-kind exchange treatment under Section 1031 of the Internal
Revenue Code. * April 7, 2006 -- Houston Exploration signed an
agreement to sell substantially all of the Louisiana portion of its
Gulf of Mexico assets, including proved reserves estimated at 186.1
Bcfe, for a gross purchase price of approximately $590 million. *
May 2006 -- Houston Exploration initiated its share repurchase
program. To date, the company has repurchased 766,800 shares of its
common stock, or approximately 2.6 percent of its outstanding
shares, for approximately $40 million. As a result, approximately
$160 million remains authorized under the company's previously
announced $200 million share repurchase program. Pursuant to this
program, Houston Exploration expects to continue to repurchase
shares in the open market or in privately negotiated transactions,
subject to market conditions, applicable legal and contractual
requirements, available cash, competing reinvestment opportunities
and other factors. * June 1, 2006 -- Houston Exploration announced
the closing of the sale of substantially all of the Louisiana
portion of its Gulf of Mexico assets. The company has retained
interests in 18 exploration leases in offshore Louisiana waters and
expects to capture additional value from these blocks by way of
drilling, farmouts or sales. About Houston Exploration: The Houston
Exploration Company is an independent natural gas and crude oil
producer engaged in the development, exploitation, exploration and
acquisition of natural gas and crude oil properties. The company's
operations are focused in South Texas, the Arkoma Basin, East
Texas, and the Rocky Mountains. For more information, visit the
company's Web site at http://www.houstonexploration.com/ .
Forward-looking statements: This news release and oral statements
regarding the subjects of this release contain forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, Section 21E of the Securities Exchange Act of 1934 and the
Private Securities Litigation Reform Act. All statements other than
statements of historical fact included in this press release are
forward- looking statements and reflect the company's current
expectations and are based on current available information and
numerous assumptions. Important factors that could cause actual
results to materially differ from the company's current
expectations include, among others, the business outlook, commodity
prices, the risks associated with the consummation and successful
integration of acquisitions, the impact of hurricanes, the risk of
future writedowns, the impact of hedging activities, the accuracy
of estimates of reserves and production rates, production and
spending requirements, the inability to meet substantial capital
requirements, the ability to complete qualified like-kind exchange
transactions to maximize tax efficiencies, the impact of onshore
asset concentration, the market and other factors for stock
repurchases, the constraints imposed by the company's outstanding
indebtedness, the relatively short production life of the company's
reserves, reserve replacement risks, drilling risks and results,
the competitive nature of the industry, and other risks and factors
inherent in the exploration for and production of natural gas and
crude oil discussed in the company's filings with the Securities
and Exchange Commission, including the company's annual report on
Form 10-K for the year ended December 31, 2005. The company assumes
no responsibility to update any of the information referenced in
this news release. Contact: The Houston Exploration Company Melissa
R. Aurelio 713-830-6887 DATASOURCE: The Houston Exploration Company
CONTACT: Melissa R. Aurelio of The Houston Exploration Company,
+1-713-830-6887, or Web site: http://www.houstonexploration.com/
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