Anadarko Petroleum Corp. said it will acquire Houston-based Howell Corp. in a cash deal valued at $265 million, which includes an estimated $65 million of Howell's bank debt once the deal closes. Anadarko is touting the acquisition as the "cornerstone" of a much larger effort to expand its oil production in Wyoming, which is where most of Howell's interests are located.
Separately, Anadarko agreed to acquire from a unit of Petro Source Investments Inc., Houston, the right to purchase "significant quantities" of carbon dioxide and the exclusive rights to market and transport LaBarge CO2 production into Wyoming's Powder River basin.
In other recent company news, US antitrust regulators gave conditional approval for Shell Oil Co., a wholly owned member of the Royal Dutch/ Shell Group, to acquire Pennzoil-Quaker State Co. for $1.8 billion in cash and assumption of $1.1 billion debt.
Anadarko-Howell deal
As of Dec. 31, 2001, Howell's proved reserves, of which 98% are developed, were estimated at 39.9 million bbl of oil and natural gas liquids and 32.8 bcf of natural gas. Howell's core area—and major producing areas—include Salt Creek and Elk basin fields, which hold more than 80% of the company's total proved reserves. Salt Creek lies in Wyoming, while Elk basin straddles the Wyoming-Montana border (see map). At yearend 2001, Howell had net production of 12,000 boe/d, mainly from these two fields.
Houston-based Anadarko said it would book roughly 50 million boe of proved reserves at the close of the transaction. Anadarko expects to raise its production targets to 203 million boe in 2003 and 225 million boe in 2004, said John Seitz, Anadarko president and CEO.
Howell's common shareholders will receive $20.75/share, while holders of the company's $3.50 convertible preferred stock will receive $76.15/share, Anadarko said. Funding for the acquisition will come from available cash and credit facilities.
The boards of both companies have unanimously approved the acquisition, which is expected to close in late 2002 or early 2003, Anadarko said.
Wyoming properties
Anadarko plans to apply its experience with its enhanced oil recovery projects in Texas and Oklahoma and its miscible gas projects in Alaska and Algeria to similar projects in Wyoming, Seitz said. "Howell's Salt Creek field is one of the largest remaining enhanced oil recovery opportunities in the Lower 48 states," he noted, adding that there is a potential for the acquired Wyoming properties to hold more than 500 million bbl of new oil reserves.
Over the next 4 years, Anadarko said it plans to invest $200 million for projects associated with Salt Creek field hoping to add an additional 150 million bbl of oil reserves. The Salt Creek EOR project will include drilling wells and installing gathering and flow lines, natural gas treating facilities, and compression facilities. The company anticipates increasing its net production from the field to 35,000 boe/d by the end of 2006 from 5,300 boe/d.
Anadarko's CO2 transaction
Anadarko said it plans to spend $27 million to build a 125 mile, 250 MMcfd CO2 pipeline from Baroil, Wyo., to Salt Creek field. Initially, Anadarko will sequester 125 MMcfd of CO2 by delivery and injection into the Salt Creek field. The company will then evaluate the additional delivery of CO2 to other fields in the state.
Shell-Pennzoil deal
When Shell's deal to acquire Pennzoil-Quaker State was first announced early this year, Shell officials said the combination of Shell and Pennzoil-Quaker State, the largest independent lubricants company in the world, would make Shell a leader in the US and global lubricants markets (OGJ Online, Mar. 25, 2002).
The US Federal Trade Commission said it would allow Shell to buy the company provided certain divestitures were made to address concerns that the deal might reduce competition and raise prices for Group II paraffinic base oil in US and Canadian markets.
Under the terms of the proposed consent order, Shell and Pennzoil must sell Pennzoil's interest in its Excel Paralubes joint venture with Conoco- Phillips to a commission-approved buyer. FTC also wants to freeze Pennzoil's ability to obtain additional Group II supply under an existing agreement with ExxonMobil Corp. at current levels.
Under the terms of that agreement, Pennzoil is entitled to up to 6,500 b/d of base oil from ExxonMobil, in grades and quantities in proportion to ExxonMobil's own Gulf Coast base oil production. "As new performance standards are adopted, there will be an even greater demand for Group II base oil in the production of motor oil and other lubricants," said Joe Simons, director of the FTC's Bureau of Competition. "Without the conditions of this order, direct competition between Shell and Pennzoil in the production of Group II base oils would be eliminated, with the significant potential for reduced competition and higher prices for consumers."
If the FTC had not stepped in, Shell would have controlled at least 39% of Group II refining capacity in the US and Canada—an unacceptable level, the commission said.
The commission unanimously voted to accept the proposed consent order, which will be subject to public comment for 30 days, until Oct. 28, after which the commission will determine whether to make it final.