BG Pays $1.3 Bln For US Shale Gas JV With Exco

BG Group said it will pay Dallas-based Exco Resources Inc $1.3 billion for an interest in shale gas resources.

BG Group said it will pay Dallas-based Exco Resources Inc $1.3 billion for an interest in shale gas resources, as oil and gas companies continue to snap up assets before an economic recovery drives prices higher.

The companies said in statements on Tuesday that each will own 50 percent of a venture into which EXCO is injecting 120,000 acres of land in the Haynesville shale gas area in Texas and Louisiana and associated gas infrastructure.

The deal is the latest in a flurry of mergers and acquisitions in the oil and gas sector in the past month.

Oil prices have doubled from a low of around $35 a barrel earlier this year on growing hopes of economic recovery.

However, analysts say the prices of oil and gas fields not risen as much and that firms are trying to secure bargains before asset prices soar back to the levels seen last year when oil prices hit a high above $147/barrel.

"This alliance brings material new resources and supply to our existing US business at a competitive price," BG Group Chief Executive Frank Chapman said in a statement.

BG shares traded up 0.48 percent at 0721 GMT, compared to a 0.68 percent rise in the DJ Stoxx European oil and gas sector index.

The deal represents BG's entry into the shale gas business.

Production of gas from shale formations, a more complex operation than producing from simple gas reservoirs, jumped in recent years as U.S. gas prices soared on the back of record crude prices.

However, weak demand for gas, due to the economic crisis, and lower oil prices have hit gas prices, and in turn, the shale gas business, hard.

EXCO was forced to slash its 2009 investment budget by 40 percent due to lower gas prices. The company ran up a $1 billion loss in the first quarter and has been selling assets.

On Monday, U.S. onshore oilfield developer Encore Acquisition Co said it would acquire oil and gas properties in the mid-continent and East Texas from EXCO for $375 million in cash.