The second largest American oil and gas company, ChevronTexaco, has sold off some of its fields in the United States. The buyer of these assets, another American company, XTO Energy, paid $1.1 billion for them. In the context of rising oil prices, American oil and gas companies are increasingly paying attention to assets within the United States and are ready to pay significant amounts for local fields.

ChevronTexaco has reserves of 12 billion barrels of oil equivalent and daily production of 2.5 million barrels of oil equivalent. Revenue in 2003 was $113 billion, net income was $7.2 billion.

XTO Energy's reserves are estimated at 100.8 billion cubic meters of natural gas and 55.4 million barrels of oil. The company produces 21.6 million cubic meters of gas per day. Revenue in 2003 was $1.2 billion, net profit - $288 million.

ChevronTexaco and XTO Energy announced the deal on Monday. The sale of some of the fields, which is expected to close in the third quarter of this year, will significantly increase ChevronTexaco's profit for the year. Last year, ChevronTexaco announced plans to divest some of its assets and focus on exploration and production of hydrocarbons at its fields overseas and in North America. The company wants to exit projects where production is growing slowly. ChevronTexaco has already entered into agreements to sell two-thirds of such assets.

"This is a significant transaction," the FT quotes ChevronTexaco Vice Chairman Peter Robertson as saying. "It's a key step in streamlining our asset portfolio to about 400 major fields in the U.S. and Canada." The XTO deal will allow ChevronTexaco to focus on its newest international projects. It is doing so at an opportune time, with oil prices at record highs and gas prices riding high. As Ray Wilcox, president of ChevronTexaco's North American exploration and production unit, told the WSJ, "now is a very good time to sell these non-strategic assets."

The acquisition of these assets gives Texas-based XTO a raft of new gas and oil fields stretching from Louisiana to Texas and New Mexico. The company, the 12th-largest U.S. gas producer, plans to begin developing a number of undeveloped fields previously owned by ChevronTexaco immediately after the deal closes. Sources close to the deal told the WSJ that this will allow XTO to increase its daily production of natural gas by 2.4 million cubic meters and oil by 14,000 barrels. "XTO has become one of the leaders in the consolidation of [oil and gas] assets in North America," the WSJ quotes the company's CEO Bob Simpson as saying.

XTO has already acquired $800 million in oil and gas assets this year. The acquisition of ChevronTexaco assets is the largest deal in its history. XTO's operations are almost entirely concentrated in the United States, developing hydrocarbons in Texas and New Mexico.

XTO is not the only company that is actively buying up not only operating but also undeveloped fields. In April, EnCana bought Tom Brown, and Kerr-McGee took over Westport Resources. In early May, Pioneer Natural Resources acquired Evergreen Resources. The problem is whether the new owners will be able to cope with the high costs required to develop new territories. (Materials from WSJ, FT were used.)

ChevronTexaco Earns $1.1 Billion