Frontier Oil Corp., Houston, and Holly Corp., Dallas, have agreed to merge in a cash and stock deal valued at about $450 million. The resulting combined company, to be called Frontier Oil Corp., will own five refineries having a combined capacity of more than 260,000 b/d.
Holly stockholders are expected to receive one share of Frontier common stock for each outstanding share of Holly common stock, plus a $172.5 million cash payment. The stock and cash merger consideration would have a value of $28.96/share, representing a premium of 31% to Holly's stockholders based on Mar. 28 closing prices.
Previously, Holly agreed to acquire ConocoPhillips's 25,000 b/d Woods Cross refinery near Salt Lake City and related assets for $25 million (OGJ Jan. 6, 2003, p. 31).
In other recent company news:
- Mariner Energy Inc., Houston, sold its 25% interest in 32 blocks in the Gulf of Mexico Falcon field area to Pioneer Natural Resources Co. for $121.6 million.
- Four international oil majors operating in France—TotalFinaElf France, Société des Pétroles Shell, Esso SAF, and BP France—have been fined 27 million euros by the Competition Authority (CA) for alleged price-fixing of fuels.
- The US Securities and Exchange Commission on Apr. 3 filed a lawsuit in US District Court in Houston seeking to halt what the SEC called a fraudulent stock manipulation scheme involving Rocky Mountain Energy Corp., Houston. A temporary restraining order was granted. RMEC describes itself as an oil and gas company having a mix of producing and nonproducing assets, including interests in a coalbed methane property in Trinidad and Tobago. As of Apr. 9, the firm had a notice on its web site saying, "The company was placed in receivership, and the offices are currently closed." An Apr. 17 hearing has been scheduled.
- Sago Energy LLC, Sugar Land, Tex., acquired the Jameson gas plant and gathering system in Coke County, Tex., from Devon Energy Corp., Oklahoma City.
- Baker Hughes Inc., Houston, and the UK-based Expro International PLC formed a joint venture company, QuantX Wellbore Instrumentation, merging the existing companies' well completion technology and permanent well-data acquisition systems.
- Two Calgary upstream companies are in the process of changing their names. Hurricane Hydrocarbons Ltd. plans to ask shareholders at a May 7 meeting in Toronto to approve a corporate name change to PetroKazakhstan Inc. Meanwhile, Canadian 88 Energy Corp. plans to ask shareholders to approve changing the corporate name to Esprit Exploration Ltd.
Frontier-Holly deal
Frontier's merger transaction with Holly is subject to government regulatory approvals, although both companies' boards have already unanimously approved the merger. The deal's completion date is expected by the third quarter.
James Gibbs, Frontier's chairman, president, and CEO, said, "After diligently looking for the right opportunity for over a year, we believe this is the best possible strategic combination for both companies."
After the merger, Gibbs will be Frontier's president and CEO, and Holly Chairman and CEO Lamar will be its chairman. The board will consist of an equal number of directors from each company.
The transaction is expected to be nontaxable to the shareholders of both companies, except for the cash to be received by Holly stockholders.
In addition, Holly stockholders will retain interest in any future litigation awards regarding jet fuel sales to the US government.
Frontier operates a 110,000 b/d refinery in El Dorado, Kan., and a 46,000 b/d refinery in Cheyenne, Wyo.
Holly operates a 60,000 b/d refinery in Artesia, NM, that is being expanded to 75,000 b/d and a 7,500 b/d refinery in Great Falls, Mont. Holly also operates 2,000 miles of crude oil and refined product pipelines in West Texas and New Mexico along with Permian basin crude gathering operations and refined product terminals.
Mariner's asset divestment
Mariner's assets being acquired by Pioneer include Falcon field, 100 miles east of Corpus Christi, Tex., in 3,400 ft of water, and the Harrier discovery on East Breaks Blocks 758 and 759.
Mariner will retain a 4.25% overriding royalty interest on seven nonproducing blocks in the Falcon area. Pioneer, which already owned 75% of Falcon field, also assumed certain contractual obligations from Mariner Energy (OGJ Online, Apr. 15, 2002).
Four majors fined
TotalFinaElf must pay 12 million euros, and each of the other three companies must pay 5 million euros, for "collusion in setting motor fuel prices" at highway service stations during January 1999-June 2000.
All four companies deny any price collusion and dispute CA's ruling. Each company, queried by OGJ, said that it probably would appeal the ruling.
Each company also said the accusation "of frequent and repeated information exchanges among service station managers on highways" had nothing to do with "collusion" but rather is normal practice in a competitive market to collect price information at different service stations.
SEC sues Rocky Mountain
US District Judge Sim Lake issued a temporary restraining order and an asset freeze against RMEC; John N. Ehrman, its former CEO and president; and W. Roderick Johnson, general counsel for the company.
The lawsuit also named John W. Ehrman Jr., John N. Ehrman's father, "as a relief defendant to recover proceeds from the alleged fraud in his possession or control."
On Apr. 2, RMEC announced that Michel F. Clerin would replace John N. Ehrman as president and CEO. No reason was given for the management change.
The federal lawsuit alleged that, starting in July 2002, Ehrman and Johnson used "four bogus share-exchange transactions to secretly obtain control" of 50% of Rocky Mountain's issued and outstanding stock. The company was formed in late May 2002.
In 1991, a federal court permanently enjoined Ehrman from violating the registration and antifraud provisions of US securities laws. That case involved Transwestern Oil & Gas Inc., the SEC's latest lawsuit said.
Sago Energy acquisition
The Jameson plant's associated natural gas gathering system involves 2,300 miles of pipeline spanning 14 counties on the eastern shelf of the Permian basin. The purchase price was not disclosed.
The plant, with 50 MMcfd of gas capacity, fractionates product for propane, butane, and natural gasoline markets and also markets natural gas liquids.
"Acquisition of the Jameson facilities will facilitate expansion of our midstream gas gathering business in Texas," said Ken Purgason, Sago Energy president and CEO. He added that Sago plans to acquire additional reserves for the system and also other midstream assets.
QuantX JV
QuantX, to be owned equally by Baker Hughes and Expro International, combined Expro's permanent monitoring business with Baker Hughes's In-Form product line.
Baker Hughes will pay Expro $30 million. QuantX will be based in Houston with an operating facility in Aberdeen.
"The QuantX ventureUpresents an important enhancement to our clients' project economics, particularly in the deep water," said Michael E. Wiley, Baker Hughes chairman, president, and CEO.
Name changes
Hurricane CEO Bernard Isautier said the proposed new name change would "emphasize the focus and continued commitment of the company to be a major participant in the growth of the petroleum industry in Kazakhstan."
Kazakhstan's oil production averaged 950,000 b/d in the first 8 months of 2002, of which the newly named company produced 15%, making it the second largest non-Kazakh producer in the area. Kazakhstan's production target in 2010 is 1.95 million b/d (OGJ, Nov. 25, 2002, p. 52).
The new name will not involve any change of ownership or management, Isautier added. The company anticipates that PetroKazakhstan stock will begin trading in June on the New York Stock Exchange and on the Toronto Stock Exchange.
Meanwhile, the Canadian 88 board already approved the name change. If the name change is finalized, the company will maintain its existing stock ticker symbol.
