November 15, 2010 / 2:41 PM / 7 years ago

Williams to buy Bakken oil acreage for $925 million

BANGALORE (Reuters) - Williams Cos (WMB.N) became the latest energy firm to bet on strong oil prices for growth as it agreed to buy acreage in Bakken shale from an un-named private seller for $925 million.

Natural gas prices have shed more than a third so far this year. Oil, meanwhile, has gained 6 percent.

This has led U.S. exploration and production companies to shift exploration dollars to acreage that contains crude oil or natural gas with a high liquids content.

Producers like Devon (DVN.N), Chesapeake (CHK.N), SandRidge (SD.N) have given indications of backing away from gas.

The acquisition of 86,000 acres in North Dakota by the natural gas producer and pipeline company values the play at just below $11,000 per acre, almost double the $5,300 per acre that Hess Corp (HES.N) paid for Bakken operator American Oil & Gas Inc AEZ.A in July.

Meanwhile, the last major shale gas deal, when Chevron (CVX.N) agreed to buy Atlas Energy ATLS.O, valued Marcellus shale properties at about $9,000 an acre, below the peak that some of the best properties fetched earlier this year above $14,000.

Williams, which saw its third-quarter results hurt by a $1.7-billion writedown related to weak gas prices, expects its oil revenue to jump more than three-fold by 2013 and hopes to double drilling on the acquired properties to 6 rigs by 2012.

The acquisition is expected to add about 185 million barrels of oil equivalent (mmboe) in total net reserve potential and will be funded with cash on hand, Williams said.

Williams declined to name the seller, but told Reuters it was a private company.

Williams said it will spend $60 million in 2010 and between $200-$300 million in 2011 in drilling and development costs in the acquired assets, apart from the purchase price.

Shares of the Tulsa, Oklahoma-based company, which have risen almost 19 percent in value in the past three months, were trading almost flat at $23.16 Monday morning on the New York Stock Exchange.

Reporting by Arup Roychoudhury and Thyagaraju Adinarayan in Bangalore; Editing by Gopakumar Warrier, Prem Udayabhanu

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