Loews Corp. and XTO Energy Inc. agreed to buy certain oil and natural gas producing properties in two separate deals from Dominion Resources Inc. for a total of $6.5 billion.
In other recent company news:
- A federal district court in New Mexico ruled against the US Federal Trade Commission and set the stage for Giant Industries Inc. and Western Refining Inc. to merge, the two companies said in a joint announcement.
- OAO Gazprom will gradually buy a 50% stake in Belarus state pipeline company Beltransgaz for $2.5 billion by 2010, the company said. Beltransgaz delivers Russian gas to the European Union and supplies Russian gas within Belarus.
- Abu Dhabi National Energy Co. announced plans to buy Northrock Resources Ltd., a subsidiary of Pogo Producing Co., for $2 billion. The transaction marks Abu Dhabi National’s entry into Canada.
Dominion assets bought
Loews, a conglomerate based in New York, will pay Dominion $4.025 billion for estimated proved reserves of 2.5 tcf of gas. XTO agreed to pay the Richmond, Va.-based electric and gas utility $2.5 billion for estimated proved reserves of 1 tcf of gas. The sales are expected to close in August.
Last year Dominion announced plans to divest its exploration and production operations except for 1 tcf of estimated proved reserves in the Appalachian basin (OGJ Online, Nov. 1, 2006).
Dominion has already offloaded certain assets this year. In April Eni Petroleum Co. Inc. agreed to buy Dominion’s oil and gas interests in the Gulf of Mexico for $4.8 billion (OGJ Online, Apr. 30, 2007). In May Paramount Energy Trust and Baytex Energy Trust, both based in Calgary, made plans to buy Dominion’s Canadian assets in two separate deals for a total of $583 million (OGJ Online, May 30, 2007).
Loews said it plans to buy Dominion’s operations in the Permian basin in Texas, the Antrim shale in Michigan, and the Black Warrior basin in Alabama.
XTO plans to acquire 542,000 net acres of Dominion leases. About 235,000 acres are undeveloped property in the Rocky Mountains, the San Juan basin, and South Texas. The acquisition will add 200 MMcfd of gas production.
Dominion also announced a process to sell its Midcontinent operations, primarily in Oklahoma, that is scheduled to begin in July. As of Dec. 31, 2006, these operations had estimated proved reserves of 780 bcf and probable reserves of 435 bcf. Last year’s average production was 120 MMcfd.
XTO said 64% of the reserves that it is buying are proved developed and about 95% are gas.
Anticipated development costs for proved undeveloped reserves are $1.50/Mcf, and XTO plans to spend $200 million on these properties in 2007. The Fort Worth company said it will operate 70% of these properties.
Bob R. Simpson, XTO chairman and chief executive officer, said the company increased its production growth guidance in 2007 to 15%, up from 10% as a result of the acquisition. XTO’s initial production growth target for 2008 is 15%.
In the Rocky Mountains, XTO is acquiring 810 bcf of proved reserves and 326,000 net acres of leaseholds, primarily in Utah’s Uinta basin. About 60% of that is developed. Net production is 26 MMcfd.
Assets include Natural Buttes gas field, Drunkards Wash coalbed methane field, and properties in the San Juan basin. XTO also is gaining entry into Jonah field in Wyoming.
In south Texas, XTO is acquiring 250 bcf of proved reserves and 216,000 net acres of leasehold, of which 50% is developed. Net production is 74 MMcfd. Production is primarily derived from the Wilcox Trend. The acquisition also provides production in the Frio and Vicksburg sand formations along the Gulf Coast.
Giant-Western merger cleared
In a May 29 order, US District Judge James O. Browning denied FTC’s request for a preliminary injunction and dissolved an Apr. 13 temporary restraining order blocking the proposed combination.
“After analyzing the evidence the parties submitted concerning the relevant product market, the relevant geographic market, and the proposed merger’s probable effect on competition in those markets, the court has determined that the order is not likely to create anticompetitive effects,” Browning said.
He said FTC did not establish it would be able to prove that the merger would violate Section 7 of the Clayton Antitrust Act if the federal agency moved the matter to an administrative proceeding. “Specifically, the FTC has not convinced the court that there is a substantial likelihood it will prove the acquisition will result in a significant lessening of competition,” Browning wrote.
Paul Foster, Western Refining’s president and chief executive officer, said the court’s ruling affirms that the merger “is procompetitive and provides important benefits to the companies’ stakeholders, including our customers, shareholders, and employees.”
FTC is appealing the decision, a spokesman said on May 30. The companies said in order to ensure an orderly process to a May 31 closing, they agreed with FTC not to close the merger before midday (MDT) on that day, but would feel free to do so after that time without a ruling from either the 10th Circuit Court of Appeals or US District Court.
Gazprom-Beltransgaz deal
According to the agreement signed by Gazprom and the Belarus state property committee, Gazprom will buy a 12.5% share in the company in four stages during 2007-10.
The contract, which took 13 years to finalize, strengthens Gazprom’s grip over gas networks to the west and follows a major proposal agreed by Russia, Turkmenistan, and Kazakhstan more than a week ago to expand oil deliveries out of Central Asia via Russia, which has threatened plans by western governments to develop alternative supply routes outside of Russia (OGJ Online, May 14, 2007).
Beltransgaz must hold a meeting to elect a supervisory company after it has transferred the first 12.5% of the company to Gazprom.
Underpinning this agreement is the companies’ pledge in December 2006 to set up a joint gas transmission venture to supply and transport gas across Belarus. In 2007 Gazprom will supply 21.8 billion cu m of gas to Belarus for $100/million cu m. The rise in prices to market rates for Belarus has seriously strained relations between the two countries and in turn, affected oil and gas supplies to Europe, prompting fears there about Russia as a reliable energy supplier.
ADNEC to buy Northrock
Abu Dhabi National’s acquisition of Northrock is expected to close during the third quarter, pending regulatory approvals.
Based in Calgary, Northrock has operations in Alberta, Saskatchewan, and the Northwest Territories. It currently produces 29,000 boe/d. For yearend 2006, Northrock reported estimated proved reserves of 706 bcf of gas equivalent.
Northrock’s production is 51% oil and its reserves are 55% oil, said Pogo. The Houston company is in the process of selling its noncore assets. Pogo said it is continuing to explore strategic alternatives, which could include a possible sale of the company.
Pogo acquired Northrock from Unocal Corp. for $1.8 billion in 2005 (OGJ, July 18, 2005, p. 30).
Abu Dhabi National is a global energy conglomerate with investments in power generation, renewable energy, upstream oil and gas operations, pipelines, services, and structured finance projects.