COMPANY NEWS: Plains All American to buy Pacific Energy for $2.4 billion
Plains All American Pipeline LP, Houston, has agreed to buy Pacific Energy Partners LP of Long Beach, Calif., for $2.4 billion, including the assumption of debt and other costs. The cash and stock transaction is expected to close by yearend.
June was dotted with several multibillion dollar deals, including Anadarko Petroleum Corp.’s announcement it would buy Kerr-McGee Corp. in Oklahoma City and Western Gas Resources Inc., Denver, in separate cash transactions totaling $21.1 billion, plus assumption of $2.2 billion debt (see story, p. 30).
Other recent high-dollar deals included:
- Shell Canada Ltd. said a subsidiary is moving closer to completing the $2.4 billion (Can.) takeover of BlackRock Ventures Inc., adding that 92.8% of BlackRock’s shares were tendered as of early June 16.
- JANA Partners LLC has called on the board of Houston Exploration Co. (HEC) to move forward on JANA’s offer to buy HEC for $62/share, or a total of $1.7 billion.
- ROC Oil Co. Ltd., Sydney, has agreed to buy Houston-based Apache Corp.’s 24.5% interest in Zhao Dong Block in the Bohai Bay off China for $260 million in cash.
Plains-Pacific Energy
The agreement calls for Pacific Energy to merge with Plains All American.
Plains All American operates about 15,000 miles of gathering and mainline pipelines that handle over 3 million b/d of crude oil in the US and Canada. Pacific Energy owns several oil pipeline and storage networks in both regions, operated in two main business units.
Pacific Energy’s operating subsidiaries will be directly or indirectly owned by Plains All American. Plains All American’s management team and board of directors will continue in their current roles and manage the combined company.
Shell Canada-BlackRock
Regulators previously approved the offer, in which Shell offered $24/share for BlackRock, which produces heavy crude oil in the Peace River and Cold Lake regions of Alberta (OGJ, May 15, 2006, Newsletter).
Shell’s subsidiary, BR Oil Sands Corp., declared the offer unconditional and also extended the tender offer until June 27.
JANA-Houston Exploration
In a June 22 letter, JANA of New York asked for a standstill and confidentiality agreement with HEC in exchange for being allowed to begin immediate due diligence. HEC issued a brief statement in response saying that its board was reviewing the proposal and will advise the shareholders of its position regarding the offer.
JANA made its offer on June 12. It has since increased its ownership position in HEC and is currently the company’s largest shareholder with 12.8% of its outstanding shares.
ROC Oil in China
Zhao Dong Block is part of a prolific petroleum province with two oil fields with gross production of 30,000 b/d, including 7,300 b/d net to Apache’s subsidiary Apache China Corp., which ROC Oil is acquiring. Gross proved and probable remaining reserves are estimated at 61 million bbl, with 15 million bbl net to Apache China.
Part of a third field, C4, is due to be developed in 2007 and is expected to begin production in 2008. Apache China is operator for the planned C4 development with 11.6% interest.
“These are quality assets; however, after reviewing our prospects for growth, we have determined that China is not strategic to our global portfolio and therefore have elected to redeploy our efforts and capital to Apache’s core areas,” said G. Steven Farris, Apache’s chief executive and president. Apache has operations in the US, Canada, the UK North Sea, Egypt, and Australia.
“The transaction is a great example of the efficiency of the industry food chain,” said John Doran, ROC Oil’s chief executive. “For Apache, with its $20 billion market capitalization and 2 billion bbl of proved reserves, the asset may have become less material. For ROC, a much smaller company, the transaction will provide a substantial boost to its reserve and production trajectory.”
The acquisition will double ROC Oil’s proved and probable oil reserves to 30 million bbl and increase its net production to 12,000 b/d from 4,500 b/d. ROC Oil will become the third largest foreign operator in China in terms of gross production, they said. The deal also will diversify ROC Oil’s operations. The company will be producing oil from four fields, three of which it will operate, in three different countries in the second half of this year. By the second quarter of 2007 when ROC Oil’s two nonoperated oil fields in the North Sea will come on stream, it will have production from six oil fields in four countries.
Since production began in 2003, some 20 million bbl have been produced from the block’s C and D fields. Production is currently through 26 wells but will be augmented by a multiwell drilling program, targeting appraisal, development, extended reach and close-in exploration opportunities over the next several years.
“Operating, development, and drilling costs are reasonable, partly because of the facilities’ proximity to shore and the size and established nature of the operation which provides economies of scale,” ROC Oil said.
Facilities include two bridge-linked platforms, one dedicated to drilling and accommodation and the other to production and processing. Production includes “a significant amount” of associated water, which is reinjected into the reservoir via 12 water injectors and four water wells.
“Reservoir quality is good to excellent, particularly in the shallower parts of the section where permeabilities are measured in Darcys and porosities range above 30%. The source rock is rich and generative. Oil gravities range from 18° to 38° API with the higher gravity (lighter) oil being in the deeper part of the section. The oil, which is waxy with a low pour point and a low acid content is currently sold into the export market. Zhao Dong oil bears comparison with Indonesian Duri crude, which recently traded at a discount of approximately $5.50/bbl to West Texas Intermediate,” said ROC Oil.
Other partners in the block include PetroChina Co. Ltd. (51%) and New XCL-China LLC (24.5%).
