Devon Energy Corp., Oklahoma City, said it would buy Mitchell Energy & Development Corp., The Woodlands, Tex., for $3.1 billion in cash and stock.
When the deal is completed in the fourth quarter, Devon will become the second-largest US independent natural gas producer, after Anadarko Petroleum Corp., Houston.
Other exploration and production company deals included:
- MarkWest Hydrocarbon Inc., Englewood, Colo., acquired two Canadian exploration and development companies for a combined $51 million.
- Lukoil Overseas Holding Ltd., a subsidiary of Russian company Lukoil, agreed to acquire a 55% stake in OOO AmKomi for $38.5 million.
- Paladin Resources PLC, London, agreed to acquire Enterprise Oil Denmark Ltd. (EODL) for $35 million plus interest.
- Abraxas Petroleum Corp., San Antonio, on Aug. 1 commenced an exchange tender offer to acquire all outstanding shares of Grey Wolf Exploration Inc., Calgary.
Devon
The boards of both companies have approved the deal, under which Mitchell shareholders would get $31 cash and 0.585 Devon share for each share of Mitchell stock. This requires Devon to pay $1.6 billion and issue 30.2 million shares to Mitchell's shareholders.
Based upon Devon's closing price of $50.26/share on Aug. 13, the deal is valued at $3.1 billion. Devon would also assume $400 million of debt and other Mitchell obligations.
George Mitchell, chairman and CEO of Mitchell, and his wife own 46% of Mitchell's outstanding shares and are due to own 9% of Devon's stock. Todd Mitchell, son of George Mitchell, will join Devon's board.
J. Larry Nichols, Devon chairman, president, and CEO said, "The Mitchell properties fit perfectly with our long-term objectives. The reserves are concentrated-nearly all in Texas [and] 71% natural gas with an impressive growth curve. In addition to the oil and gas properties, we will also acquire one of the largest suites of US midstream assets of any independent. We believe this transaction can deliver significant growth in per share value."
George Mitchell said, "This transaction provides important benefits to our shareholders and employees. It provides significant value while retaining a unique opportunity to participate in the exciting upside potential of Devon. Our shareholders and employees will benefit from becoming part of a larger, stronger, and more diversified company."
Based upon estimates as of June 30, Devon would acquire 2.5 tcfe of gas in the acquisition, increasing its proved reserves to more than 1.5 billion boe. Reserves would be 58% natural gas, 32% oil, and 10% natural gas liquids. About 82% of those reserves would be in North America.
Devon would also acquire natural gas processing plants, pipelines, and other midstream assets valued at $800 million-1 billion.
The two companies produced 1.4 bfcd in the US in the second quarter, making Devon the second largest independent gas producer in the nation.
Devon said it expects operating and overhead synergies of at least $20 million/year.
After the acquisition, Devon's outstanding shares will increase to 156 million from 126 million. Its capital structure will include $150 million in preferred securities, about $3.4 billion of net long-term debt, and other long-term liabilities of $340 million.
The $3.4 billion of debt excludes certain Devon debentures that are exchangeable into Chevron Corp. common stock. (Devon owns 7.1 million shares of Chevron.)
MarkWest
MarkWest said the acquisition of two Canadian companies will more than double its reserves to 63 bcfe.
Leland Energy Canada Ltd. and Watford Energy Ltd., both of Calgary, will add 15 MMcfd of gas production and 190 b/d of oil output to MarkWest's 6.1 MMcfd of production.
The same management directs both companies; it will remain in place and operate as before the transaction.
MarkWest said the acquisition adds more than 106,000 acres and more than 300 drillable locations, most of which are defined by 3D seismic. It intends to collect more 3D data late this year.
Lukoil
The deal will bring Lukoil's stake in AmKomi to 65%, a controlling share.
AmKomi owns nine production licenses and one exploration license in the Komi Republic that contain reserves of 20.8 million tons, Lukoil said, adding that all producing fields are in an initial stage of production.
As part of the agreement, Lukoil Overseas will provide $17 million in financing for AmKomi to settle its debts to the International Finance Corp. and Aminex PLC. It will also provide financing for company development.
Presently, Lukoil-controlled OOO Komineft owns 10% of AmKomi; the Republic of Komi owns 35%; and Cyprian company Aminex Production Co. Ltd. owns 55%.
Lukoil Overseas Pres. Andry Kuzyaev said the acquisition of the controlling stake in AmKomi, along with the previous acquisition of a controlling stake in OOO Parma-Oil and a recent offer to buy the independent oil producer Baitek, has "formed the basis for an establishment in the southern part of the Republic of Komi of a new oil company with total reserves up to 80 million tons and annual production up to 3 million tons."
"Economic advantages of the deal with Aminex [as well as acquisition of a 50% share in OOO Permteks] also mean that Lukoil Overseas acquires proven reserves at the price that will secure high efficiency," he said.
Paladin
EODL owns Enterprise Oil PLC's interest in the producing Siri oil field in the Danish North Sea and in the nearby Stine discovery.
Enterprise said the Siri interest represents 4 million bbl of reserves and that it produced 5,900 b/d net to Enterprise in the first half. Stine is being developed via an extended-reach well from Siri and is expected to come on stream in September.
Paladin also will assume certain liabilities related to Enterprise's activities in Denmark, said Enterprise.
The deal is subject to the consent of the Danish government and approval of Paladin's shareholders. It is expected to be complete by the end of September and be effective from July 1.
Pierre Jungels, Enterprise Oil chief executive, commented: "We have received a full price for assets that are no longer material to Enterprise. The transaction demonstrates our commitment to extracting value from peripheral assets and enables us to concentrate our resources on activities with greater long-term potential."
Paladin acquired a 20% interest in License 6/95 and a 60% interest in and the operatorship of Block 7/98.
Abraxas Petroleum
Abraxas Petroleum made an offer of 0.6 Abraxas share for each publicly held share of Grey Wolf Exploration.
Abraxas and its wholly owned Canadian subsidiary, Canadian Abraxas Petroleum Ltd., already own 48.3% of Grey Wolf's outstanding common stock. The offer expires at 5:00 p.m. MDT on Sept. 5, unless it is extended.
The offer is conditioned upon the tendering of a majority of the Grey Wolf common shares not currently owned by Abraxas and Canadian Abraxas and approval by Abraxas stockholders.