Company News: Pogo to acquire Unocal’s Canadian E&P assets

July 18, 2005
Pogo Producing Co. agreed to acquire Northrock Resources Ltd.

Pogo Producing Co. agreed to acquire Northrock Resources Ltd., a wholly owned Canadian subsidiary of Unocal Corp., for $1.8 billion in a move that will give Pogo a new core area in western Canada.

In other recent company news:

• Royal Dutch/Shell Group and Russian gas monopoly OAO Gazprom signed a memorandum of understanding to swap shares in western Siberia’s Zapolyarnoye field and the Sakhalin II project.

• Gazprom and independent gas producer OAO Novatek, Moscow, announced a partnership in which they will jointly work on gas production facilities, gas pipelines, and petrochemical plants.

• Pioneer Natural Resources Co., Dallas, has agreed to acquire properties in the Permian basin and in South Texas in two separate transactions in which it will pay a total of $177 million.

• Kinder Morgan Energy Partners LP (KMP) plans to acquire two terminals in separate transactions totaling $48 million and plans to invest an additional $48 million in two unrelated terminal expansion projects.


Pogo’s transaction is unrelated to Chevron Corp.’s pending acquisition of Unocal or CNOOC Ltd.’s unsolicited rival bid (OGJ Online, June 23, 2005). Unocal disclosed in May its intention to sell its Canadian exploration and production assets (OGJ Online, May 11, 2005).

Pending Canadian government approval, the Pogo-Northrock transaction is expected to close in the third quarter. The acquisition will increase Pogo’s proved oil and gas reserves by 45% to 2 tcf of gas equivalent, increase its worldwide net acreage by 82% to 3.15 million net acres, and add more than 900 identified drilling opportunities.

Under the agreement, Pogo will acquire 644 bcfe of estimated proved reserves on 300,000 net acres, plus 1.1 million net acres of undeveloped leasehold. Pogo said the undeveloped acreage has numerous prospects.

Northrock operates 60% of its production, recently averaging 16,000 b/d of oil and natural gas liquids and 85 MMcfd of gas. Its reserves are 45% gas and 55% oil. Northrock’s reserves life of 10 years extends Pogo’s overall reserves life.

Northrock’s development acreage is concentrated in Saskatchewan and Alberta. It is exploring in the Northwest Territories, British Columbia, and the Alberta Foothills.

Gazprom-Shell swap

Gazprom and Shell’s pending transaction marks Gazprom’s entry into the LNG sector. The MOU calls for Gazprom to acquire as much as 25% plus one share in Sakhalin II. Shell plans to acquire a 50% interest in Zapolyarnoye’s Neocomian gas-condensate reservoirs, about 200 km northeast of Urengoi gas field in northern Russia.

The difference in value between the assets will be defined and compensated through a package of cash and other assets, the companies said. The transaction is expected to close in 2006.

Sakhalin II will facilitate year-round oil and gas production in northern Sakhalin Island by piping it through two large-diameter onshore oil and gas pipeline systems to ice-free ports in southern Sakhalin (OGJ Online, Mar, 16, 2004).

The consortium formed to manage the project is Sakhalin Energy Investment Co. Ltd. Current ownership is Shell Sakhalin Holdings BV with 55% interest, Mitsui & Co. Ltd. subsidiary Mitsui Sakhalin Holdings BV with 25%, and Mitsubishi Corp. subsidiary Diamond Gas Sakhalin BV, 20%.

Gazprom-Novatek partnership

Gazprom and Novatek’s partnership calls for the two companies to establish an integrated, long-term strategy for the Russian gas industry. This will include jointly developing condensate transmission infrastructure.

Regarding petrochemicals, Gazprom and Novatek plan to construct plants to produce ethylene, polyethylene, propylene, and polypropylene.

Analysts said Gazprom had control of some of what are now Novatek’s production assets during the 1990s.

Pioneer in Permian basin

The names of the sellers in Pioneer’s deal were not disclosed. The transactions are expected to close within 30 days, the company said.

Pioneer said it is purchasing 70 million bbl of substantially undeveloped proved oil equivalent reserves.

The company estimates it will invest $400 million during the next 5 years to develop the properties.

KMP buys terminals

The terminals being acquired are an oil products terminal in New York Harbor from ExxonMobil Oil Corp. and a dry-bulk river terminal along the Ohio River in Hawsville, Ky.

The New York terminal has storage capacity of 2.3 million bbl for gasoline, diesel, and fuel oil. KMP expects to bring several idle tanks back into service for a further 550,000 bbl of capacity. KMP also plans to rebuild a berth to accommodate tankers.

The terminal expansion projects involve KMP’s liquids terminal complex on the Houston Ship Channel and its Shipyard River bulk terminal in Charleston, SC.

On the Houston Ship Channel, KMP will construct 600,000 bbl of storage capacity for gasoline and distillate at its Pasadena liquids terminal.

KMP’s 2005 acquisitions as of July 11 totaled nearly $400 million. In June, KMP agreed to acquire a natural gas storage facility with 6.3 bcf of capacity in Dayton, Tex., from Texas Genco for $51 million plus debt of $49 million.