By OGJ editors
HOUSTON, Dec. 13 -- ConocoPhillips plans to acquire Burlington Resources Inc. for $35.6 billion in a transaction that would boost ConocoPhillips's rank as a US gas producer.
The deal remains subject to approval of Burlington Resources stockholders and US regulators. Terms call for Burlington Resources stockholders to receive $46.50 in cash and 0.7214 shares of stock for each Burlington Resources share they own.
Closing is expected in the second quarter of 2006. Upon completion of the transaction, ConocoPhillips stockholders will own 83% of the resulting company, and Burlington Resources shareholders will own 17%.
ConocoPhillips Chairman and Chief Executive Officer Jim Mulva said, "ConocoPhillips will expand our portfolio of high quality, low-risk, long-lived gas reserves and become a leading producer of natural gas in North America."
Mulva told reporters during a Dec. 13 conference call that negotiations took several months. ConocoPhillips "had thought about [this acquisition] for a number of years."
Burlington Resources Chairman, Pres., and Chief Executive Officer Bobby S. Shackouls said, "The overlap throughout North American is tremendous. As we looked around the field of possible combinations, this one made tremendous sense to us."
Mulva and Shackouls said they doubt that either company will have to make divestitures to get approval for the transaction from the US Trade Commission. Burlington Resources also is filing a request for a review by the US Securities and Exchange Commission.
In the latest OGJ200 based on annual reports for 2004, ConocoPhillips ranked third among US producers in assets. Burlington Resources was 10th (OGJ, Sept. 19, 2005, p. 24).
Combined company
Upon completion of the transaction, ConocoPhillips will have pro-forma reserves of 10.5 billion boe as of Dec. 31, 2004, excluding 300 million boe associated with ConocoPhillips's Syncrude operations. Of that, 52% is in the US and Canada.
Pro-forma 2005 production will be 2.3 million boe/d, including Lukoil and Syncrude. Half of that production is in the US and Canada.
Based on Dec. 9 closing market prices and debt levels as of Sept. 30, the combined ConocoPhillips and Burlington would have an enterprise value of $135 billion, of which $29 billion is net debt and preferred securities. Enterprise value is market capitalization plus debt and preferred shares less cash and cash equivalents.
ConocoPhillips expects to achieve pre-tax cost savings of $375 million/year after the operations of the two companies are fully integrated. The savings will come from reduced corporate expenses and operating expenses.
Shackouls and Steven J. Shapiro, Burlington Resources executive vice-president of finance and corporate development, plan to retire after the acquisition is completed. Shackouls will join the ConocoPhillips board.
Banc of America Securities analyst Daniel Barcelo said, "ConocoPhillips achieves scale in a broadly financially accretive transaction."
The transaction value is $92/share, based on the $63.07 closing price of ConocoPhillips shares on Dec. 9, the last unaffected day of trading before the transaction announcement.
