NERCO TO ACQUIRE UNION TEXAS ASSETS IN GULF

A unit of Nerco Inc., Vancouver, Wash., has signed definitive agreements to pay almost half a billion dollars to expand its holdings in the U.S. Gulf Coast region. Nerco agreed to pay about $475 million for the Gulf Coast offshore division of Union Texas Petroleum Holdings Inc., Houston. Included in the purchase are interests in 175 gross oil and gas wells and 61 net wells in the Gulf of Mexico. The wells are in fields in federal water and in two fields in Louisiana state water. Union Texas

March 18, 1991

3 min read

A unit of Nerco Inc., Vancouver, Wash., has signed definitive agreements to pay almost half a billion dollars to expand its holdings in the U.S. Gulf Coast region.

Nerco agreed to pay about $475 million for the Gulf Coast offshore division of Union Texas Petroleum Holdings Inc., Houston.

Included in the purchase are interests in 175 gross oil and gas wells and 61 net wells in the Gulf of Mexico. The wells are in fields in federal water and in two fields in Louisiana state water. Union Texas operates 16 of the fields.

Most of the Union Texas leases are near Nerco's current Gulf Coast operations.

RESERVES, PRODUCTION

Nerco estimates total assets to be added by the Union Texas purchase include more than 315 bcf of gas equivalent proved reserves and 184 bcf probable and possible reserves, as well as "significant exploration potential." The purchase covers Union Texas leases totaling 341,000 acres, of which about 287,000 acres are undeveloped.

At the end of 1990 Nerco held an estimated 507 bcf of equivalent gas reserves.

Union Texas said its U.S. offshore oil and gas assets are mainly in the central and western Gulf of Mexico. At yearend 1990 its U.S. offshore proved reserves totaled about 6.7 million bbl of oil and 295 bcf of gas, accounting for about 57% of its total proved reserves in the U.S. and 13% worldwide.

Combined with current producing leases, the Union Texas wells will about double Nerco's productive capacity to 6,200 b/d of oil, 400 MMcfd of gas, and 5,200 b/d of natural gas liquids.

The purchase is expected to be final within the next month. Initial financing will be completed mainly through a revolving credit facility led by Morgan Guaranty Trust Co., New York. Nerco plans to retire about $150 million of the acquisition debt with proceeds from a common stock offering.

During the past 3 years, Nerco has established a substantial base of oil and gas operations on the Gulf Coast. It has spent about $1 billions including money committed to the Union Texas purchase, to add producing leases. When the purchase is complete, the Union Texas assets will be held by a subsidiary of Nerco Oil & Gas Inc., Nerco Inc.'s oil and gas unit.

Nerco Oil & Gas Pres. Roger A. Markle said, "We anticipate most of the key offshore division Union Texas employees will become Nerco employees and will complement our existing staff." Union Texas said Nerco could hire as many as 200 Union Texas employees as a result of the purchase.

Following the purchase, Nerco expects to add an office in Houston as a base for the new oil and gas division. Nerco currently has oil and gas offices in Vancouver and Lafayette, La.