(Yicai Global) Feb. 3 -- Shandong Xinchao Energy Corp.’s stock price leapt today on the news that the US unit of the Chinese oil and gas developer will pay USD420 million for an oil and gas field in Texas to expand its energy assets in the region.

Xinchao Energy’s stock price [SHA:600777] surged 5.88 percent to close at CNY1.44 (USD0.22). Earlier in the day it had risen almost 10 percent.

Moss Creek Resources will purchase the exploration and development rights to an 18,000 acre shale oil, natural gas and liquified natural gas field in the Lone Star State from local oil explorer Grenadier Energy Partners II, the Yantai-based firm said yesterday.

The target assets have proven reserves of 65 million barrels of crude oil and 123 drilling sites, it said. At present, the field is producing around 9,000 barrels of oil a day.

The acquisition is close to Moss Creek’s existing production in Texas’ Howard and Borden counties and midland basin. It will allow the Houston-based firm to get access to high-quality, low-cost energy assets near its base, increase its oil and gas reserves and reduce the cost of production per barrel, it said.

The pricing was based on a reserve assessment report made by a third-party agency and calculated according to a crude oil price of USD51.287 per barrel, natural gas at USD0.417 per barrel, and liquefied natural gas at USD22.259 per barrel, Xinchao Energy said.

Moss Creek has a revolving credit line of USD850 million through a syndicate composed of Bank of America, Citibank and US financial services firm Wells Fargo. This, together with its own funds, is expected to serve as guarantee of payment. The transaction should be completed by March 31, it said.

Editor: Kim Taylor