The merger and acquisition (M&A) bug continues to bite indiscriminately at both upstream and downstream companies, while other companies are forming strategic partnerships.
In one of the larger M&A deals recently announced, Sunoco Inc., Philadelphia, unveiled plans to acquire Pittsburgh-based Aristech Chemical Corp. from Japan's Mitsubishi Corp. for $695 million in cash, including $115 million for working capital.
KeySpan Energy Corp., Brooklyn, NY, said it will purchase Gulf Canada Resources Ltd.'s 50% interest in Gulf Midstream Services (GMS), making KeySpan the sole owner of the midstream services company. KeySpan recently completed its acquisition of Eastern Enterprises, Weston, Mass., and EnergyNorth, Manchester, NH (OGJ Online, Nov. 9, 2000), creating the largest natural gas distribution company in the US Northeast, said KeySpan.
EnerMark Income Fund agreed to buy Cabre Exploration Ltd., both of Calgary, for $350 million (Can.) in stock and assumed debt.
Gas Technology Institute (GTI), Chicago, said that it will acquire for an undisclosed amount a 51% interest in Ticora Geosciences Inc., a Denver-based coalbed methane and shale resource evaluation firm.
Houston-based services firm Weatherford International Inc. said it agreed to acquire a 49% interest in Universal Compression Inc., also of Houston, through a merger of Weatherford Global Compression Services with Universal.
Norway's Aker Maritime AS agreed earlier this month to sell its 2-year old marine seismics unit, Aker Geo, to French geophysical specialist Cie. Generale de Geophysique SA (CGG) in a cash and shares deal worth some $118 million.
France's Bouygues Offshore SA and Doris Engineering SA agreed to join forces to create a new Houston-based independent engineering outfit that aims to take a slice of the market for deepwater field development solutions in the Gulf of Mexico, Offshore West Africa, and Offshore Brazil regions.
Sunoco purchase
Included in Sunoco's purchase of Aristech are five of its chemical plants, located at Neal, WV; Haverhill, Ohio; Neville Island, Pa.; Pasadena and LaPorte, Tex., and a research center in Pittsburgh. The plants have the capacity to produce 1.5 billion lb/year of polypropylene, more than 1.6 billion lb/year of phenol and related derivatives, including bisphenol-A, and 800 million lb/year of plasticizers. Sunoco will make contingency payments up to a net present value of $167 million if realized margins for polypropylene and phenol exceed certain agreed upon thresholds.
Sunoco Chairman and CEO John G. Drosdick said that the acquisition would serve as a platform for expansion in product lines with high demand growth and with less capital intensity than traditional refining.
"While margins in chemicals have recently been low due, in part, to rising hydrocarbon raw material prices, the acquisition is anticipated to be significantly accretive to earnings and cash flow as the chemical industry moves to midcycle performance over the course of the next few years," Drosdick said.
He added that the polypropylene and phenol businesses integrate well with Sunoco's existing chemical operations and are a significant step in further upgrading Sunoco's portfolio of businesses.
KeySpan-Gulf Canada deal
After the close of KeySpan's purchase of Gulf Canada's interest in GMS, the company will be renamed KeySpan Energy Canada (KEC).
Although a sale price was not disclosed, KeySpan is acquiring the interest through KeySpan Energy Development Corp. KeySpan acquired its initial 50% interest in GMS from Gulf Canada in December 1998 (OGJ, Nov. 9, 1998, p. 42).
"This transaction allows us to consolidate our control in this leading midstream business," said Robert B. Catell, KeySpan's chairman and CEO. "By doing so, we can now pursue our own strategies for the company," Catell added, noting that KeySpan's activities in the Western Canada basin have proven very successful.
Gulf Canada Pres. and CEO Dick Auchinleck said the sale would allow Gulf Canada to focus on oil and gas exploration and production. Auchinleck said that Gulf Canada had revealed several months ago it would sell the interest. He said it also marks the end of Gulf Canada's program of asset disposals to restructure its balance sheet. "We will retain a strategic link with [KeySpan] and have established priority processing provisions for Gulf's gas at their facilities," he added.
KEC offers natural gas marketers and producers in western Canada a range of midstream services. The company's assets include interests in 14 processing plants and associated gathering systems with capacity to process more than 1.5 bcfd of natural gas. KEC also owns NGL facilities in Edmonton, a major NGL hub.
EnerMark-Cabre deal
EnerMark's proposal to purchase Cabre-after receiving approval from Cabre shareholders-would increase EnerMark's production to 38,600 boe/d. It would add 8,700 b/d of oil and 33 MMcfd of gas production.
Cabre stockholders would get four EnerMark units and a warrant to buy another unit for $4.71 by Dec. 15, 2001. EnerMark would also assume more than $38 million in Cabre debt. The offer is a premium of 38% over the recent Cabre stock price.
In the past year, EnerMark has spent more than $700 million to acquire a number of smaller Canadian exploration companies, including Western Star Exploration Ltd., Pursuit Resources Corp., and EBOC Energy Ltd.
In August, Enerplus Group, Calgary, which manages the EnerMark royalty trust, was itself acquired by El Paso Energy Corp., Houston.
GTI purchase
Upon completion of the deal, Ticora-which will join GTI's E&P Services group-will continue to provide geologic-based technical support to major and independent coal and shale gas producers and the natural gas research community.
Revenues generated by Ticora will provide GTI with one new source of funding.
GTI, a not-for-profit organization that had received the majority of its funding from the US Federal Energy Regulatory Commission, is currently undergoing a transition from a FERC-funded research and development organization to a privately funded institution.
In 1998, FERC approved an agreement to shift funding for GTI, then called the Gas Research Institute, from surcharges on interstate gas use to a market-driven program (OGJ, Aug. 17, 1998, p. 40). That agreement continued industry funding for GRI's core and noncore R&D projects for 3 years-$164 million in 1998, $132 million in 1999, and $98 million in 2000. Industry would fund only core projects from 2001-04. Those projects would be capped at $70 million in 2001 and $60 million/year for 2002-04.
GTI-created from the merger of the Gas Research Institute and the Institute of Gas Technology in April-will focus on R&D efforts on gas industry-related issues such as environmental quality and improving gas system reliability and maintenance costs.
Ticora and GRI have been partners on a number of projects, including recent work on the Lewis shale gas resource and coalbed gas in the San Juan and Powder River basins, said David Hill, emerging resources manager of GTI E&P Services Division. GTI said the merger would allow it to create a full-fledged service company thoroughly knowledgeable about coalbed gas development.
Weatherford-Universal deal
After the completion of the deal between Weatherford and Universal, the resulting company will retain the name Universal Compression Services and will be the world's second largest compression services company, with 1.8 million hp of compression capacity, said Weatherford.
Weatherford will first buy out its 36% minority partner in Weatherford Global Compression, GE Capital, for $206.5 million. Universal will then issue Weatherford 13.75 million shares of Universal common stock, representing 48% of the total outstanding shares of the new company, in exchange for most of the assets and associated liabilities of its Weatherford Global Compression Services division. Weather- ford will retain about $40 million of Weatherford Global's assets.
The transaction is subject to shareholder and regulatory approval but is expected to close in the first quarter of 2001.
Stephen Snider, Universal president and CEO, said, "We expect substantial consolidation synergies in North America, where our businesses are very similar. In addition, our international footprint will be expanded considerably. We are very excited about the potential for the new Universal."
Weatherford expects a pretax charge for the transaction of about $20 million relating to transaction costs and severance expenses. The company also warned it may incur a noncash charge because the market price of the Universal stock at time of closing is less than its approximate $490 million book value, and there may also be a noncash charge for the establishment of deferred taxes because Weatherford is no longer consolidating its compression operations.
Aker Maritime-CGG deal
Under Aker Maritime's deal with CGG, which Aker Maritime said should be concluded by mid-January 2001, CGG will acquire Aker Geo's two seismic survey vessels, Aker Amadeus and Aker Symphony, as well as 1,000 sq km of seismic data. The agreement also covers transfer of personnel from Aker Geo to CGG.
Aker Maritime's geology and geophysical consulting firm, Aker Geo Petroleum Services, was not included in the sales package.
Of the total transaction value, Aker will pocket some $25 million in cash. The remaining $93 million will be paid in CGG shares, which, depending on stock price, could translate into a shareholding in the French company of as much as 16%.
Aker said it was "committed" to retaining $33 million in CGG shares for at least 90 days after sealing the sales agreement.
In the first 9 months of this year, Aker Geo had revenues of 203 million kroner-and a loss after financial items of 129 million kroner.
Bouygues, Doris proposal
Operating under the banner of Doris Inc., the 50-50 joint venture of Bouygues and Doris will provide technical and economic concepts and screening studies; field architecture including flow assurance, tender development, and evaluations; and basic and detailed design of subsea risers and flowlines, floating systems, and topsides.
The opening of Doris Inc., according to Chairman Loïc des Deserts, is a "strategic move to be closer to our customers," that will place "particular emphasis" on developments off West Africa, in the Gulf of Mexico, and off Brazil. F
