COMPANY NEWS: Patina Oil & Gas to acquire Bravo in $119 million deal

Nov. 25, 2002
Patina Oil & Gas Corp. said it will acquire privately held Bravo Natural Resources Inc. of Tulsa for $119 million. The transaction marks Patina's second significant acquisition in the last 30 days.

Patina Oil & Gas Corp. said it will acquire privately held Bravo Natural Resources Inc. of Tulsa for $119 million. The transaction marks Patina's second significant acquisition in the last 30 days.

Other recently reported or planned merger and acquisition activities include:

•India's state-owned Oil & Natural Gas Corp. (ONGC) plans to invest $1.24 billion during the ongoing fiscal year to acquire oil equity abroad, in view of declining domestic oil output and in the absence of any major oil discoveries at home in recent years.

•Fort Worth-based Quicksilver Resources Inc. signed an agreement to buy the Michigan natural gas assets of Enogex Exploration Corp., Oklahoma City, for $32 million.

•Agriprocessing giant Archer Daniels Midland Co. (ADM) said it will acquire the interest of Union Chemical Co. (UCC) in World Ethanol, a joint venture of ADM and UCC, effective Jan. 1, 2005.

In other recent company news:

•El Paso Corp., Houston, reported that it plans to exit its energy trading business, citing "substantially diminished business opportunities" and "higher capital costs" associated with the business as the reasons behind its decision.

Patina's M&A activities

Earlier this month, Denver-based Patina closed on its $62 million purchase of Le Norman Energy Corp., Oklahoma City, which was announced in October (OGJ Online, Oct. 24, 2002).

Commenting on the company's latest transactions, Patina Chairman Thomas J. Edelman said, "The acquired properties not only provide us a substantial geographic diversification, they should generate numerous opportunities to profitably redeploy our substantial free cash flow through additional acquisitions and drilling."

Bravo's assets are mainly in Hemphill County, Tex., and in Custer and Caddo counties in western Oklahoma. Bravo holds 133 bcfe of proved reserves, 90% of which is natural gas. The company's current net production is 14 MMcfd of gas and 170 b/d of oil.

Bravo holds interests in 272 producing wells, of which it operates 119 wells. The company's reserves are concentrated in two fields: Buffalo Wallow in the Texas Panhandle and Eakly-Weatherford in Oklahoma.

Bravo's properties are "generally comprised of tight sand natural gas formations," Patina said.

ONGC's spending plans

According to ONGC Chairman and Managing Director Subir Raha, the company is looking to buy oil equity acquisitions in Sudan, Iran, Libya, and in the US through its wholly owned subsidiary ONGC Videsh Ltd. (OVL).

OVL floated a special-purpose vehicle, named Nile-Ganga Pte., for picking up the 25% equity stake belonging to Calgary-based Talisman Energy Inc. in the Greater Nile Oil Project in Sudan. The payment of $758 million for this stake will be made in January 2003.

OVL also acquired a 10% stake in an exploration block in the Gulf of Mexico off Louisiana, through its Houston-based subsidiary Sakhalin India Ltd. The latter would buy the 10% interest of McAlester Fuel Co., McAlester, Okla., for 350 million rupees.

"In consortium with Indian Oil Corp. and Oil India Ltd., OVL will invest $30 million in the Farsi offshore oil and gas field in Iran," Raha said.

Quicksilver's acquisition

The purchase of Enogex's Michigan properties, which currently are producing 8.5 MMcfd from the Antrim shale formation, will make Quicksilver the largest natural gas producer in Michigan and in the Antrim shale trend, the company said.

Quicksilver's deal, which is expected to close Dec. 2, is subject to closing adjustments.

Quicksilver said it will serve as operator of more than 90% of the reserves acquired. The assets contain 80% proved developed and producing properties. The company will finance the acquisition with available cash and existing credit facilities.

The Antrim shale is a thick blanket formation generally found at 500-2,200 ft in depth. Much of this shale lies in northern Michigan. Natural gas in the Antrim is developed and produced using "unconventional methodology," similar to that used in developing and producing coalbed methane, Quicksilver said. The company currently holds interest in 2,700 Antrim wells and entered the play in 1991.

ADM ethanol deal

UCC, a wholly owned unit of Dow Chemical Co., will continue marketing industrial ethanol through the JV during a 2-year period. During this timeframe, the JV will convert existing UCC customers to fermentation ethanol made at facilities owned by ADM in Peoria, Ill., and Clinton, Iowa. At the end of the 2 years, Dow's UCC unit will then exit the industrial ethanol business, it said.

Dow's exit decision, which was reached "after a lengthy and thorough internal assessment," fits strategically with the company's goal to focus its efforts on businesses that have "the greatest integration," said Pat Gottschalk, global business director for Dow's solvents and intermediates.

El Paso's trading exit

At the time of El Paso's announcement earlier this month that it would exit trading, it also reported a net loss of $69 million for the third quarter compared with a net gain of $211 million in third quarter 2001. The company—like many others in the energy merchant sector—has been methodically following an asset divestiture plan in recent months in an effort to shore up its balance sheet and raise much-needed capital.

While it works toward liquidating its trading portfolio, El Paso has created a new, separately capitalized unit, Travis Energy Services LLC. The new subsidiary will serve to separate both credit and balance sheet activity of trading from the rest of the company.

El Paso said that it would transfer a large portion of its trading portfolio to Travis Energy in first quarter 2003. The company expects the entire portfolio to be liquidated in 2 years' time. As of Sept. 30, El Paso's trading portfolio had a net asset value of $968 million, the company said.

During the fourth quarter, El Paso also will implement new accounting rules that would eliminate the use of "mark-to-market" accounting "for certain energy contracts that are not derivatives," the company said.

As of Sept. 30, El Paso said it also had $4.5 billion in total available liquidity.