COMPANY NEWS: Basell to buy Lyondell Chemical in $19 billion deal

July 23, 2007
Polyolefins manufacturer Basell Service Co. BV plans to buy Lyondell Chemical Co. of Houston for about $12 billion, plus the assumption of Lyondell’s $7 billion debt.

Polyolefins manufacturer Basell Service Co. BV plans to buy Lyondell Chemical Co. of Houston for about $12 billion, plus the assumption of Lyondell’s $7 billion debt. The transaction will create one of the world’s largest chemical companies.

In other recent company news:

  • Plains Exploration & Production Co. has agreed to acquire Pogo Producing Co. in a cash and stock deal valued at $3.6 billion.
  • Statoil ASA and Norsk Hydro ASA shareholders approved the merger of Statoil and the oil and gas division of Hydro during separate July 5 extraordinary general meetings.
  • Chesapeake Energy Corp. and Anadarko Petroleum Corp. have entered into multiple agreements, including a joint venture involving the companies’ separate assets in the Deep Haley area of the Delaware basin in West Texas.
  • Constellation Energy Partners LLC, Baltimore, said it will become one of the Cherokee basin’s largest producers when it acquires Amvest Osage Inc., a unit of private Amvest Corp., Charlottesville, Va.
  • Petro Rubiales Energy Corp., Vancouver, BC, formerly Consolidated AGX Resources Corp., completed a $440 million (Can.) private placement and acquired 75% of Rubiales Holding Ltd. (RHL).

Basell-Lyondell deal

Basell, of Hoofddorp, the Netherlands, agreed to pay $48/share for Lyondell. The boards of both firms approved the acquisition. The transaction is expected to close within several months, subject to regulatory approvals and approval of Lyondell shareholders.

The combined 2006 revenues of Basell and Lyondell would have been $34 billion. Together, the two companies have 15,000 employees worldwide. New York industrial holding group Access Industries privately owns Basell.

Lyondell owns a 282,600 b/cd refinery in Houston that processes very heavy, high-sulfur crude. Executives said Lyondell’s assets, access to raw materials, and refining capacity complements Basell’s assets.

Basell produces polypropylene and advanced polyolefin products and provides technical services for its proprietary technologies. Together with its joint ventures, Basell has manufacturing facilities in 19 countries and sells products in more than 120 countries.

Lyondell manufacturers chemicals and plastics, refines heavy, high-sulfur crude, and produced ethylene, polyethylene, styrene, propylene, propylene oxide, gasoline, and ultralow-sulfur diesel. It produces fuel oxygenates methyl tertiary butyl ether and ethyl tertiary butyl ether.

Basell had been looking for chemical acquisitions. Recently Huntsman Corp. terminated a $5.6 billion agreement to be acquired by Basell. Huntsman agreed to be acquired by Apollo Management LP for $6.5 billion.

Plains E&P-Pogo deal

Pogo stockholders will receive 0.68201 share of Plains E&P common stock and $24.88 cash for each Pogo stock share, representing a total consideration of about $60/share. The transaction is subject to stockholder approval from both companies.

The transaction nearly doubles Plains E&P’s production with the addition of substantial producing properties and significant growth potential in Texas, primarily the Panhandle, Permian, and Gulf Coast regions, as well as the prolific Madden field in Wyoming and the San Juan basin in New Mexico.

The Pogo assets are complementary to the Plains E&P’s assets, having long production lives and low decline rates. At yearend 2006 pro forma for asset sales, Pogo reported proved reserves of 219 million boe.

Upon closing, which is expected in the fourth quarter, Plains E&P will have a proved reserves base of 635 million boe. Proved, probable, and possible reserves potential is estimated at 1.4 billion boe.

Plains E&P is considering creating a master limited partnership as well.

Statoil-Hydro merger approved

Statoil’s merger with Hydro, valued at $30 billion, will create the world’s largest offshore operator (OGJ, Jan. 1, 2007, p. 29).

The merger, approved by the boards of directors of both companies in March, is expected to be completed on Oct. 1.

The new firm will be based in Stavanger. Group functions will be in Stavanger and Oslo, however, and the chief executive officer will operate from both locations.

Chesapeake-Anadarko JV

Chesapeake and Anadarko, which currently operate a total of 16 drilling rigs in the Deep Haley area, plan to conduct an aggressive drilling program for the area and could increase their drilling activity as the joint venture develops.

Under the agreements, the companies are obligated to jointly evaluate and explore more than 1 million gross acres in the Deep Haley area and share drilling, completion, production, and midstream operations on a roughly 50-50 basis.

The deal afforded Anadarko about $310 million in cash and other consideration, including reimbursement of capital expenditures previously incurred in connection with the development of its Deep Haley properties and Chesapeake’s commitment to fund a portion of Anadarko’s future Deep Haley area capital costs. In addition, Anadarko obtained 50% of certain Chesapeake nonproducing leasehold interests in Loving County, Tex.

Chesapeake received:

  • 25% of Anadarko’s existing Deep Haley area production.
  • 25% of Anadarko’s leasehold in the central and eastern portions of the Deep Haley area.
  • 50% of Anadarko’s leasehold and contractual rights in the western portion of the Deep Haley area.
  • A lease from Anadarko on 2,100 net acres in the Fayetteville Shale play in Arkansas.
  • An assignment of 5,600 net acres of undeveloped leasehold in the Anadarko basin in western Oklahoma.
  • The Oklahoma City real estate assets acquired by Anadarko last year as part of its acquisition of Kerr-McGee Corp.

The Deep Haley area in West Texas has recovered more than 1.4 tcf of gas from over-pressured Pennsylvanian formations, said Anadarko. The company started work in the basin in 2003 and has accumulated the rights to over 400,000 net acres in the area.

Chesapeake, a veteran in the area, has generated during May a combined 90 MMcfd of gas equivalent of gross production from its most recent seven wells in the Deep Haley area.

Constellation buys Amvest unit

Constellation is to pay $240 million for Amvest Osage, closing by the end of July. Constellation already owns Cherokee basin assets.

Amvest Osage averages 16 MMcfd of net gas production from 370 producing wells from 93 bcf of proved reserves as of Mar. 31 at $8.48/MMbtu (OGJ Online, Aug. 16, 2005). The seller has identified more than 1,000 drilling and recompletion opportunities. It has a 13-year exclusive concession from the Osage Indian Nation for CBM and shale rights on 560,000 contiguous net acres with potential for as many as 100,000 additional acres. The flexible concession agreement provides for leasing as drilling occurs.

Petro Rubiales private placement

RHL owns 100% of Meta Petroleum Ltd., which has interests in the Rubiales, Piriri, and Quifa blocks in Colombia and produces more than 18,500 gross (5,000 net) b/d of 12.5° gravity oil from the Rubiales and Piriri association contracts in the Llanos basin (OGJ Online, Feb. 9, 2006).

Meta proposes to hike the heavy oil production rate to 66,000 b/d by drilling clusters of one vertical and four to five horizontal wells with downhole submersible pumps in giant Rubiales field in Meta Department. An estimated 200 new wells are required to boost output to more than 126,000 b/d.

The field produces from the Tertiary Carbonera formation at less than 3,000 ft. The association contracts remain in force until July 2016.

A pipeline to Cusiana Station in Casanare Department from Rubiales field is needed to replace trucking of crude and cut transportation cost. The 215-km line, with ultimate capacity of 200,000 b/d, is to be completed by June 2009.

Meanwhile, Petro Rubiales granted Pacific Stratus Energy Ltd. an option to earn up to 50% of the Petro Rubiales interest in Quifa by funding Petro Rubiales’ share of exploration costs estimated at $5.3 million.