Several US independents have been actively acquiring or merging with companies smaller than themselves, and XTO Energy Inc., Fort Worth, announced plans to acquire a package of properties from ChevronTexaco Corp.
Recent deals include:
Pioneer Natural Resources Co., Dallas, and Evergreen Resources Inc., Denver, said their boards have approved a $2.1 billion merger in which Evergreen will become a Pioneer subsidiary.
XTO plans to buy 150 oil and natural gas properties from ChevronTexaco Corp. for $1.1 billion in a move to expand XTO's existing operations, to enter a coalbed methane play in the Rocky Mountains and a new operating region in South Texas.
Chesapeake Energy Corp., Oklahoma City, agreed to acquire privately held Greystone Petroleum LLC of Houston in a $425 million transaction involving natural gas assets in northern Louisiana.
Forest Oil Corp., Denver, plans to acquire all outstanding common shares of Wiser Oil Co. of Dallas for $330 million, or $10.60/share. In addition, Forest will assume $160 million in debt.
Pioneer-Evergreen
The merger, subject to Evergreen and Pioneer stockholder approval, is expected to be completed in the second half. Pioneer plans to retain Evergreen's offices as its Rocky Mountain operational base. Evergreen is a leading developer of US coalbed methane.
Terms call for Evergreen shareholders to receive $39/share in cash, Pioneer stock, or a combination of the two, the companies said.
Evergreen shareholders are to receive 1.1635 share of Pioneer for each Evergreen share.
"Evergreen's long-lived natural gas reserves are a perfect fit with our vision to expand our premier asset foundation in North America to further anchor our growing exploration and international portfolio," said Pioneer Chairman and CEO Scott D. Sheffield.
The addition of Evergreen's reserves will increase Pioneer's proved reserves by 33%.
As of Dec. 31, 2003, Evergreen held 1.495 tcfe in proved reserves. Of those, 94% were in the Raton basin, 4% in the Piceance and Uintah basins, and 2% in southern Canada. The acquisition cost for current proved reserves is estimated to be $1.40/Mcfe.
Evergreen currently produces 150 MMcfed and expects to average 160 MMcfed for the year. Production from Evergreen's assets is expected to double by 2008.
Standard & Poor's Ratings Services, New York, affirmed its BBB- corporate credit rating on Pioneer but revised its outlook to negative from stable. S&P placed its BB+ corporate credit rating for Evergreen on CreditWatch with positive implications.
"The negative outlook on Pioneer reflects that a downgrade is possible if the company fails to complete the $600 million debt reduction plan that its management outlined to Standard & Poor's," said S&P credit analyst Bruce Schwartz.
XTO's CBM play
The properties are in seven states, with more than 90% of production in Texas and New Mexico.
The transaction is scheduled to close on or before Aug. 6, with an effective date retroactive to Jan. 1.
XTO's internal engineers estimate proved reserves at 786 bcfe, 88% of which are proved developed. The acquisitions initially will add production of 88 MMcfd and 14,000 b/d.
In the Rockies, XTO is expanding its CBM presence with the purchase of 67 bcfe of proved reserves in Buzzards Bench field in Emery County, Utah. This property, in the Ferron sand, is an offset to Drunkard's Wash field and produces 12 MMcfed.
In South Texas, XTO is purchasing 54 bcfe of proved reserves in nine counties, with net production totaling 20 MMcfed.
The sale is part of ChevronTexaco's previously announced plans to divest nonstrategic assets and realign strategic business units.
Chesapeake-Greystone
Greystone has a lease covering 16,100 gross acres over the crest of Sligo field in Bossier Parish, La.
Chesapeake anticipates acquiring an estimated 214 bcfe of proved reserves, 51 bcfe of probable and possible reserves, and production of 45 MMcfed. The deal, expected to close in June, is subject to US regulatory approvals.
Upon closing, Chesapeake's proved oil and natural gas reserves will be 3.8 tcfe.
The company plans to increase production from the Greystone properties by 50% to 65-70 MMcfed through a drilling program involving two to four rigs during the next 18 months.
Chesapeake has identified 70 proved undeveloped sites as well as 75 probable and possible locations on the acreage.
After allocating $65 million of the purchase price to unevaluated leasehold and midstream gas assets, Chesapeake's cost of proved reserves will be $1.68/Mcfe.
The company estimates that its all-in acquisition cost for the 265 bcfe of estimated reserves will be $1.94/Mcfe, accounting for anticipated future drilling costs to fully develop the proved, probable, and possible reserves.
The proved reserves, having a reserves-to-production index of 13 years, are 98% gas and 93% operated.
Forest-Wiser Oil
Forest said the deal, expected to close by early in the third quarter, will provide the following:
An increase in its Canadian business unit's estimated proved reserves and production by a respective 35% and 67%.
An increase in its Western business unit's estimated proved reserves and production by a respective 29% and 26%.
A "significant" addition to its Gulf Coast and Canadian exploration acreage.
Forest said it "can profitably exploit and add value to the Permian basin assets and reduce field operating costs."
Wiser's Canadian assets have "numerous infill drilling locations for exploitation, and the Wild River area contains several multipay exploration opportunities" that Forest called similar to its Narraway field in the Alberta foothills.
As of yearend 2003, Wiser's reported estimated proved reserves were 191 bcfe, of which 51% was natural gas. This year, Wiser produced 64 MMcfed in the first quarter.
Craig Clark, Forest's president and CEO, said that most of Wiser's assets are in the same reservoirs and trends as Forest's existing assets.
Meanwhile, Forest plans to divest at least $100 million of nonstrategic assets, mainly from its existing portfolio, in the US and Canada.
