US-based exploration and production companies are scrambling to acquire more assets to bolster their portfolios amid a robust oil and gas price environment.
Among the recent major transactions:
- The board of Pogo Producing Co., Houston, approved a definitive merger agreement to acquire NORIC Corp.-the parent firm of North Central Oil Corp., Houston-for about $630 million in cash and Pogo common stock.
- Barrett Resources Corp., Denver, acquired interests in 54,675 acres of coalbed methane (CBM) properties in the Raton basin in southern Colorado for $52.9 million cash. Barrett is purchasing the properties from an affiliate of Kansas City Power & Light Co. (KCP&L).
- Vaalco Energy Inc., Houston, signed a letter of intent to acquire Western Atlas Afrique Ltd.'s 65% interest in the Etame block off Gabon.
Meanwhile, the US E&P unit of an Australian company is close to completing the disposition of all its US assets to US-based independents. Petsec Energy Ltd., Sydney, said its wholly owned US subsidiary Petsec Energy Inc. (PEI) has either sold or signed deals to sell most of its leases. The sales will total about $65 million.
Pogo-NORIC deal
Under its agreement with NORIC, Pogo will also assume about $120 million of North Central's net debt. The combined company will have an equity value of about $1.3 billion and a total enterprise value of about $2.2 billion, said Pogo.
The combined company, to retain the Pogo Producing Co. name, will be based in Houston. Pogo's current chairman, president, and chief executive, Paul G. Van Wagenen will remain chairman, president, and CEO of the newly formed firm.
Under terms of the transaction, which is expected to close in the first quarter of 2001, NORIC shareholders will receive about $630 million (in a combination of half cash and half Pogo common stock), subject to a collar.
NORIC's shareholders will receive about $315 million worth of Pogo common shares, if the average closing price of Pogo stock during the 20-day trading period ending on the fifth trading day prior to the closing of the merger is between $22.25 and $27.25.
Pogo says it expects the deal to result in the 40% savings in general and administrative cost efficiencies. "Savings are expected to come from the elimination of duplicative activities, improved operating efficiencies, and the combination of the companies' work forces," the company said.
According to Pogo, on a pro forma basis, the merger will increase its total proved oil and gas reserves to 1,379.7 bcfe, consisting of 61% gas and 39% oil, from 847.4 bcfe at yearend 1999. Meanwhile, the company's expected production for 2000 will increase to 165 bcfe/year from 122 bcfe/year. Also, the deal extends Pogo's reserve life to 8.3 years, the firm said.
Commenting on the transaction, Van Wagenen said, "Thisellipsewill enable us to achieve a number of key strategic objectives going forward, including the significant enhancement of our long-lived North American natural gas position and improved exploration and production potential in our core domestic operating areas in and around the Gulf of Mexico.
"Our combination with North Central will provide us with a highly concentrated property mix centered in five core areas, augmenting our strong presence in the Gulf of Mexico and Permian basin areas and further diversifying our existing operations in Thailand and Hungary with new properties in the Rocky Mountain region," he said.
Barrett's acquisition
Barrett's acquisition of the properties from KCP&L subsidiary KLT Gas Inc. includes proven CBM gas reserves of 75 bcf, with about 80% undeveloped. About 83% of the total leasehold, or 45,555 acres, is undeveloped. Most of that is under a perpetual mineral ownership with a 100% net revenue interest. A gas gathering and compression system and 57 producing wells also are included, with an effective sales date of Oct. 1, Barrett said.
The company will begin immediate development of the Vermejo formation coals at depths of 1,400-2,400 ft. It plans to continue an active development program and to drill several pilot programs targeting the Vermejo and Raton formation coals in 2001. Both coals are currently producing in the basin.
"These properties provide opportunity to grow gas reserves, production, cash flow, and operating income and complements our quality portfolio of low-risk, long-term development projects in the Rockies," said Peter A. Dea, Barrett chairman and CEO. "We also have the opportunity to leverage our technical and operational expertise into a new core area to maximize the value to our shareholders."
The KCP&L earnings impact from this transaction will be 26 cents/share and will be booked in the fourth quarter. Its previously announced sale of Raton properties to Denver-based Evergreen Resources Inc. resulted in earnings of 62?/share in the third quarter and 23?/share in the fourth quarter of this fiscal year. In aggregate, KLT Gas transactions will contribute $1.11/share to the KCP&L total year earnings.
"These sales by KLT Gas show the benefit of our ongoing strategy of acquiring natural gas properties, developing the resources, and then divesting at a timely point to realize value for our shareholders," said Bernie Beaudoin, president of KCP&L.
Gregory J. Orman, CEO and president of KLT Inc., said the sales to Evergreen and Barrett complete the company's investment cycle in the Raton basin. KLT Gas will now turn its attention to developing 175,000 additional acres of CBM gas properties in the Powder River, Sand Wash, Hanna, Arkoma, and Forest City regions. The company will continue to acquire early-stage CBM prospects where KLT Gas can add value.
Vaalco purchase
Although Vaalco Energy's agreement to buy into Etame block is subject to governmental approval and to final agreement on terms-which were not disclosed-Vaalco expects the deal to close by yearend.
The Etame block holds a 3,700 b/d oil discovery drilled by a Vaalco-led consortium in 1998 (OGJ, June 29, 1998, p. 40). Vaalco said it drilled a delineation well in 1999 to establish the oil-water contact in the field, and it has also been reprocessing 3D seismic data to better define the accumulation.
The company hopes to drill a second delineation well in early 2001. It has already signed a letter of intent with an unnamed drilling company to use a jack up to drill that well, Vaalco said.
The planned 8,000-ft well is designed to test an additional fault block updip from the discovery well. Vaalco currently holds 17.85% of the block. Other partners include Sasol Petroleum International Pty. Ltd., Petrofields Exploration & Develop- ment Co., and Alcorn Petroleum & Minerals Corp.
PEI sale
In April, PEI filed Chapter 11 bankruptcy, and in June the company reached an agreement with its creditors to sell itself or its assets. PEI has already sold its 33% interest in Mustang Island 883 and 100% interest in Mustang Island leases 748, 749, 795, 797, 940, and 941 to LLOG Offshore Exploration Inc. for $6.4 million. The effective date of the transaction was Aug. 1.
PEI will present several purchase and sale agreements to the bankruptcy court for approval as initial bids. PEI expected to conduct a final auction of the assets this month if any competing bids are received.
A brief description of the proposals follows:
- Apache Corp., Houston, signed an agreement for PEI's 50% working interest in Main Pass leases 5, 6, 7, 84, 90, 91, 93, 104, and 105; Grand Isle 45; Ship Shoal leases 192, 193, and 194; South Marsh Island 7; and West Cameron leases 237, 543, 544, and 653. The effective date of the proposed sale is Oct. 1. The sale price is $51.2 million. Apache is the operator of the leases.
- ATP Oil & Gas Corp., Houston, signed an agreement to buy PEI's interests in the West Cameron 461 lease and South Marsh Island 189 and 190 leases. The purchase prices are $1.6 million and $3.1 million, respectively, each with an effective date of Oct. 1.
- Purchase and sale agreements have been signed with Stone Energy Corp., Lafayette, La., covering PEI's interests in South Pelto 22 lease and Vermilion Block 258 leases. The purchase prices are $800,000 and $1.7 million, respectively, each with an effective date of June 1.
There are six exploration leases and other miscellaneous assets that are not subject to the Apache, ATP, or Stone Energy agreements, which PEI will market and sell subject to bankruptcy court approval.
Net proceeds from the sales of PEI's assets will be distributed to PEI's creditors, Petsec (USA) Inc. (wholly owned by Petsec Energy Ltd.), as equity owner, and certain of PEI's senior management team in the US, said Petsec Energy Ltd.
Other acquisitions
Among other US E&P companies acquiring properties:
- St. Mary Land & Exploration Co., Denver, will acquire several oil and gas properties primarily located in the Anadarko basin of Oklahoma from Colt Resources Corp. and JN Exploration & Production LP for $37.2 million cash. The acquisition is effective Sept. 1 and is expected to close in late December upon completion of customary due diligence.
- Chancellor Group Inc., Las Vegas, Nev., is arranging $27 million in financing from interests associated with the company's board. Completion of the financing agreement will trigger the company's options to acquire producing properties with exploration potential in Carter County, Okla., Greenwood County, Kan., and Wyoming's Powder River basin. The funds will also enable the company to begin developing oil and gas properties in Pecos County, Tex., and exercise options it was negotiating on exploration licenses in Kazakhstan.
- Infinity Inc., Chanute, Kan., acquired interests in an additional 2,400 acres of CBM property for its Pipeline project in the greater Green River basin in Wyoming. Jeffrey L. Dale, vice-president of exploration-development at Infinity, said, "We have chosen the name 'Pipeline' for this project because the property is located near several interstate gas pipelines." Infinity will have an average 85% net revenue interest and a 100% working interest in the additional 2,400 acres in the Pipeline project, which increases Infinity's acreage in the project by 16%. Terms of the transaction were not disclosed. The company expects to complete several wells before yearend and says gas sales will commence before the end of its current fiscal year. Also, Infinity plans to sell 87.5% of its interest in the LaBarge CBM project in Sublette County, Wyo., to an unnamed independent producer for an undisclosed amount of cash and commitments to pay 100% of the drilling and completion costs associated with the five-well pilot program. The buyer will carry Infinity's 12.5% interest in LaBarge development, up to $5 million.
- Golden Chief Resources Inc., Wichita, will acquire MJM Oil & Gas Inc., Richardson, Tex., for 30% of Golden Chief's shares. MJM operates 150 oil and gas wells in Texas. Golden Chief said the deal is contingent on its raising at least $10 million for further development of the MJM properties.
- FieldPoint Petroleum Corp., Austin, Tex., acquired working interests in two leases in the Hutt (Wilcox) field in Atascosa and McMullin counties, Tex., for $170,000. The leases include 14 wells, two of which are producing 25 b/d of oil. FieldPoint plans facilities improvements, production equipment upgrades, and wellbore optimization activities.