Atmos Energy Corp. agreed to acquire its Dallas counterpart TXU Gas Co., a wholly owned subsidiary of TXU Corp., for $1.925 billion to create a natural gas distribution company having 3.1 million customers in 12 states.
In other recent company news:
- Aramco Overseas Company BV, a subsidiary of Saudi Aramco, signed an agreement to acquire a strategic shareholding in Showa Shell Sekiyu KK to form a partnership with Royal Dutch/ Shell Group.
- Petrofac Resources, the investment arm of the Petrofac Group, acquired Amerada Hess (Malaysia-PM304) Ltd., the Amerada Hess subsidiary that operates and owns a 40.5% interest in Cendor field off peninsular Malaysia.
- El Paso Production Co., a subsidiary of Houston-based El Paso Corp., agreed to buy a Unocal Corp. affiliate that indirectly holds a 50% interest in UnoPaso, a Brazilian joint venture, for $61 million.
- The marketing subsidiary of Petroleo Brasileiro SA, Petrobras Distributidora SA (BR), agreed to acquire Agip do Brasil SA from Italian ENI SPA for $450 million.
Atmos-TXU Gas
"This transaction clearly fits within our stated strategy of growth through acquisitions in our core business," said Robert W. Best, Atmos Energy chairman, president and CEO. "The opportunity to deliver stable, long-term growth by acquiring a large, regulated customer base in metropolitan areas is exciting. Our seasoned management has successfully completed nine major acquisitions during the past 18 years."
The merger transaction is expected to close by yearend, subject to review under the federal Hart-Scott-Rodino Act and certain state regulatory approvals in Missouri, Virginia, and Iowa.
The transaction is expected to be "immediately accretive to earnings," said J. Patrick Reddy, Atmos Energy's senior vice-president and chief financial officer.
TXU Gas is a largely regulated natural gas transmission and distribution business in Texas with 26,000 miles of distribution main pipeline, 8,000 miles of distribution services, 6,800 miles of transmission pipeline, and more than 1.4 million customers. It also owns five natural gas storage reservoirs with a working capacity of 38 bcf.
C. John Wilder, TXU's CEO, said that the deal "represents our continued commitment to unlocking value and focusing on core businesses." TXU is in the process of selling assets to reduce debt. Like other merchant energy companies, TXU previously borrowed heavily to expand its business.
The transaction, to be accounted for as an asset purchase, is expected to close in the first quarter of Atmos Energy's 2005 fiscal year.
Moody's Investors Service and Standard & Poor's credit rating agencies both are considering cutting Atmos Energy's debt ratings. Moody's analysts said that they probably will cut the ratings by several levels. Moody's affirmed its Baa3 senior unsecured rating for TXU. S&P analysts said they might downgrade Atmos' ratings.
Atmos said it would raise cash for the transaction through long-term debt and by issuing $500-600 million of stock. Merrill Lynch & Co. is expected to provide a bridge loan, Atmos said.
Aramco's Showa Shell stake
The partnership will enhance Showa Shell's refining and marketing business in Japan, Shell said. Terms of the deal were not disclosed. HSBC Investment Bank, which advised Sauid Aramco on the deal, said the equity value was about $500 million.
Shell, the 50% shareholder of Showa Shell, agreed to transfer 37.5 million shares, or 9.96% of the total shares issued, to Saudi Aramco. Shell Petroleum NV selling Shell Japan Holdings BV to Saudi Aramco will accomplish the transfer, expected to be completed in August.
Saudi Aramco also agreed to acquire an additional 18.8 million shares, or 4.99%, in Showa Shell subject to satisfaction of certain commercial conditions.
Shell Oil Products Chief Executive Rob Routs said, "Saudi Aramco brings crude supply strength through its scale, crude mix, and flexibility and will provide Showa Shell an 'affiliate' supply relationship that brings benefits of economic value and security to Showa Shell."
Petrofac acquisition
The acquisition will make Petrofac the new operator. Other partners in the block are Petronas Carigali Sdn. Bhd. Carigali 30%, Kuwait Foreign Petroleum Exploration Co. 25%, and PetroVietnam Investment Development Co., a wholly owned subsidiary of Petrovietnam, 4.5%.
Cendor field is in the northeastern corner of Block PM304 in about 70 m of water with principal producing horizons in the H Group of Middle Miocene sands. Oil production is expected to start in late 2006 or early 2007 (OGJ Online, Mar. 23, 2001).
El Paso-UnoPaso
The transaction's terms also call for as much as $19 million in additional payments contingent on natural gas price and volume thresholds.
The deal is expected to close by July 31, and El Paso then will own 100% of UnoPaso. The acquisition will add 71 bcfe of proved reserves to El Paso's reserve base and will increase production by 27-30 MMcfed.
UnoPaso owns six exploration and development concessions off Northeast Brazil. Additionally, El Paso is acquiring Unocal's 30% interest in an adjacent exploration block. UnoPaso owns a 35% interest in certain producing concessions associated with Pescada-Arabaiana field, operated by Petroleo Bras- ileiro SA.
BR-Agip
BR's deal requires approval from Brazilian regulators. Agip do Brazil specializes in distributing liquefied petroleum gas, fuel, and lubricants.
The move is part of BR's strategy to increase its LPG distribution market share and consolidate its presence in the automotive fuel distribution market in certain regions of Brazil, Petrobras said.
