SEAGULL TO ACQUIRE ARKLA EXPLORATION

Seagull Energy Corp., Houston, has agreed to acquire Arkla Exploration Inc. from Arkla Inc., Shreveport, La., for about $402 million.

The transaction expected to net Seagull reserves totaling about 578 bcf of gas and 7.3 million bbl of oil and condensate would more than double Seagull's proved reserves and nearly double its total assets. According to Seagull's 1991 annual report, the company's reserves at yearend 1991 were estimated at 401.2 bcf of gas equivalent (bcfe), including 335.1 bcf of gas and 11 million bbl of oil.

Independent engineers at yearend 1991 estimated Arkla's proved reserves at 635 bcf of gas and 9 million bbl of liquids.

Seagull Chairman Barry J. Galt said the company plans to keep many of Arkla Exploration's employees and to establish a meaningful presence in Shreveport.

"Arkla's already got good people in Shreveport and an operating base," a Seagull official said. "We want to move in, put our name on the door, and continue the good operations Arkla already has."

Seagull has lined up financing for the acquisition from a group of major U.S. banks. A new credit facility consisting of a $475 million line of revolving credit and a $150 million 3 year term loan will replace an existing $225 million line of revolving credit.

Boards of both companies have approved the deal, which Seagull and Arkla hope to close before yearend, subject to regulatory approvals and purchase price adjustments.

POSITIVE FOR SEAGULL

Arkla assets to be acquired by Seagull consist almost entirely of oil and gas reserves, 90% of which are in the Arkoma basin of eastern Oklahoma and western Arkansas and the Arklatex basin in East Texas and northern Louisiana. About 75% of the reserves are in seven fields: Wilburton field in Oklahoma, Cecil and Aetna fields in Arkansas, Carthage and Waskom fields in East Texas, and Ruston and Sligo fields in Louisiana.

Arkla also holds leases on about 268,000 net developed acres and 159,000 net undeveloped acres to be included in the deal.

Seagull assets as of Jan. 1, 1992, were valued at $609 million. Operating groups and estimated values include:

Exploration and production assets valued at about $371 million, half in the Texas Panhandle and western Oklahoma and half on the U.S. Gulf Coast, primarily off Texas in the Gulf of Mexico.
Enstar Alaska gas pipeline transmission and distribution system valued at $188 million. The 350 mile Alaska Pipeline Co. system gathers gas at the wellhead for delivery to Seagull's Enstar Natural Gas Co. (ENGC) distribution utility, which serves about 80,500 customers in South Central Alaska. Alaska Pipeline and ENGC are based in Anchorage.
Pipeline operations on the U.S. Gulf Coast valued at $50 million include about 350 miles of gas gathering line half onshore and half offshore and 75 80 miles of products pipeline in Texas and Louisiana. Pipeline group operations include gas marketing, processing, and engineering and construction.

"Just 5 years ago, our total assets were valued at less than $300 million and our proved reserves were about 30 bcfe of gas," Galt said.

A THIRD FRONT

Galt said acquiring a "third front" of exploration and production activity from Arkla would be extremely positive for Seagull.

"Not only have we been able to buy a large and attractive package of properties at the right price, but we've also satisfied several important criteria that we imposed on ourselves," he said.

Galt said about 93% of reserves to be acquired are gas. In addition, Seagull would operate about 60% of the properties, including all seven major fields. The company's working interests in major fields would average more than 60%. Also, the deal includes a small portfolio of exploratory prospects.

Seagull earlier this year completed a $199 million acquisition, begun in 1991, from Mesa Inc. of producing properties and undeveloped acreage in western Oklahoma and the Texas Panhandle. Largely because of the acquisition and eight successful exploratory wells, company reserves at yearend 1991 had increased to 335.1 bcf of gas and 11 million bbl of oil from 127.7 bcf and 5.8 million bbl at yearend 1990.

Seagull was formed in 1981 in a spinoff of the pipeline operations of Houston Oil & Minerals Corp. just before the latter company was acquired by Tenneco Inc.

Seagull began acquiring exploration and production properties in late 1981. It acquired Enstar in June 1985.