LSB Industries Inc. has announced that as a part of the Chemical business hedging strategy to protect against rising natural gas prices, a subsidiary within LSB’s Chemical business closed an acquisition of a working interest in certain natural gas properties at a cost of $49 million. The acquisition included an approximate 7.7 percent average working interest within the Marcellus Shale, located in Wyoming County, Pennsylvania. The purchase includes interests in 14 proved producing natural gas wells, 7 proved non-producing natural gas wells, and 36 proved undeveloped future drilling locations identified on the leasehold. LSB expects to spend $38 to $40 million from the expected cash flows from the producing wells for additional capital expenditures to fully develop its share of these leaseholds through 2015.
LSB’s Chemical business considers this acquisition as a hedge against potential natural gas price increases in the future for a portion of its chemical plants’ future natural gas feedstock requirements. The purchase price was funded by utilizing cash on hand. LSB is considering financing a portion of the acquisition price from a third party in the near term.
In commenting on the acquisition, Jack E. Golsen, Board Chairman and CEO stated that “Our Chemical business has the capacity at their Alabama and Oklahoma facilities to consume over 12 million mcf of gas annually in the production of nitrogen products, including anhydrous ammonia and urea ammonium nitrate. This acquisition includes potential gas reserves equal to approximately 20 percent of our current annual natural gas requirements over the next 8 years at an estimated present value cost of approximately $2.30 per mcf, including development and operating costs.”