Stone Energy Corp., Lafayette, La., and Basin Exploration Inc., Denver, unveiled plans Monday for the companies to merge operations in a stock-for-stock transaction valued at $410 million.
The merger will create a company with a market capitalization valued at $1.5 billion, including $1 billion in equity and $100 million in net debt.
The boards of directors for both companies approved the agreement, through which Basin stockholders will receive 0.3974 shares of Stone for each Basin share. Based upon Stone's closing price of $54.16 on Friday, Oct. 27, this represents $21.52 for each Basin share, a premium of 10%. Stone also will assume $48 million of Basin debt. Stone's stockholders will own 71% of the combined company and Basin's stockholders will own 29%.
Stone Energy said the merger would widen its critical mass and scope, allowing Stone Energy to aggressively compete for and secure future growth opportunities in the Gulf of Mexico. It also will expand Stone's existing portfolio with a number of geologically promising, multiple-well targets across the Gulf of Mexico, according to the company.
The merger also will increase Stone Energy's proven reserves by 54% to 596.9 bcfe from 387.4 bcfe as of year end 1999. It will raise Stone's current daily production 50% to 300 Mmcfe/d from 200, expand its drilling prospect inventory 50%, and raise prospective undeveloped acreage from 74,000 to 267,000 acres, said Stone.
Stone will add 22 producing properties and 47 unexplored primary term lease blocks in the Gulf of Mexico. The deal also allows Stone to leverage its existing technical and operational expertise and infrastructure across combined operations in the Gulf of Mexico, and use Basin's extensive inventory of 3D seismic databases across the Gulf of Mexico.
The companies expect the transaction to be completed early in 2001. The combined company, to be called Stone Energy Corp., will be headquartered in Lafayette, La., said D. Peter Canty, Stone energy president. Stone will retain Basin's employees after the merger is completed.
"Their expertise will enhance our already solid platform for continued profitable growth," Canty added. "We believe the combination of our respective strengths will create the premier Gulf of Mexico-focused E&P company."
Canty will become chief executive officer of Stone effective January 2001 and continue in that role in the combined company. Michael Smith, the chief executive officer of Basin, will join Stone's board of directors once the merger is completed.