By OGJ editors
HOUSTON, Feb. 5 -- Plains Exploration & Production Co. Monday inked an deal to acquire 3TEC Energy Corp. for a total of $432 million in cash and stock. As part of the agreement, each 3TEC stockholder will receive $8.50 in cash and 0.85 share of Plains E&P common stock for each share of 3TEC stock held. Both companies are based in Houston.
Plains E&P said the acquisition will give the company "significant exploration potential" in South Louisiana's Gulf Coast region. In addition, the company said the deal would provide it with new core areas in East Texas and the Gulf Coast. Plains E&P's primary area of production is in Southern California.
"This resulting property base is expected to supply several years of drilling locations, and should expand through an extensive, ongoing 3D seismic acquisition and evaluation program," Plains E&P said in a statement. "3TEC has a 3-year exploration drilling inventory with multiple separate prospects which complements (our) development program. . .particularly the Inglewood field in Southern California."
The acquisition also will give Plains E&P a production mix of 37% natural gas and 63% oil, the company said. The company's proved reserve base, meanwhile, will be 19% gas and 81% oil, it said. Plains E&P's total proved reserves will be 302 million boe at yearend 2002. Plains E&P's proved developed reserves as a percentage of total reserves are expected to increase to 58% from 54% while the reserve-to-production ratio will decrease to 20.9 years from 27.1 years, the company reported.
"3TEC's high quality, natural gas-oriented properties bring more balance to our reserve base and production mix and diversity to our risk profile, said James C. Flores, Plains E&P chairman and CEO. "3TEC's high-impact exploration program is very complementary to (Plains E&P's) substantial inventory of low-risk development drilling," he added.
Flores will remain chairman and CEO of the company and Plains E&P's current executive staff will continue in their capacities. The company's board will increase in size by two directors, which are to be appointed by 3TEC.
Based on the transaction value and $80 million of unproved properties, the deal implies a proved reserve purchase price of $1.19/Mcfe, the companies said.
