Texaco Inc. and Monterey Resources Inc., Bakersfield, Calif., have agreed to a merger involving heavy oil reserves in California.
The $1.4 billion transaction will add 385 million bbl of proved reserves to Texaco's U.S. assets.
Additional probable reserves have been identified for future development, says Texaco.
The move follows similar deals involving California giant heavy oil fields.
In June, Monterey acquired McFarland Energy Inc., Bakersfield, in a $106 million deal that included McFarland's holdings in Midway-Sunset oil field (OGJ, June 23, 1997, p. 29). Only weeks earlier, Shell Oil Co.'s CalResources LLC unit and Mobil Exploration & Production U.S. Inc. agreed to merge their California exploration and production operations (OGJ, June 9, 1997, p. 24)-concentrated mostly in the heavy oil region of the San Joaquin Valley.
If the Texaco-Monterey merger is approved, Texaco's California oil production will increase to 180,000 b/d from 126,000 b/d, a boost of almost 43%.
Under terms of the agreement, Texaco will exchange its common stock for all outstanding shares of Monterey, which will be valued at $21/share. Texaco will assume Monterey's $285 million debt.
Monterey's board of directors agreed to recommend the merger to its shareholders. Approval is expected within 90 days, subject to shareholder and regulatory approval.
Texaco and EOR
Monterey has primary holdings in the Midway-Sunset, Kern River, South Belridge, and Coalinga fields of California's San Joaquin Valley.
Texaco plans to increase proved reserves in these fields through additional capital investment and expanded enhanced oil recovery operations, said Claire Farley, vice-president of Texaco and president of North America Production.
Texaco's area holdings include Kern River, McKittrick, Midway-Sunset (North Midway, Midway Secs. 35 and 36, and Midway-Security), and San Ardo.
The company uses steam-based EOR in all of these fields (hot water is also used in San Ardo in Monterey County).
Texaco Chairman and Chief Executive Officer Peter Bijur said, "Gaining Monterey's valuable resources...will further enhance Texaco's leadership position in the area of enhanced oil recovery and give us a clear competitive advantage in a region in which we already have significant production and reserves."
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