Calpine selling oil, gas assets for $1.05B

Power producer Calpine Corp. announced June 29 it will sell all its domestic oil and gas exploration and production assets to an indirect subsidiary for $1.05 billion.

Calpine said the subsidiary, Rosetta Resources Inc., is selling 45.3 million shares for $725 million in private placement, and will use the proceeds, plus $325 million in credit, to buy all of Calpine’s domestic exploration and production assets.

And since Rosetta will be privately held and Calpine will own no shares in the company once the transaction is completed on July 7, Calpine spokeswoman Katherine Potter said she could divulge no more details about the deal — such as who will actually own the assets. Analysts said the company did well to group its gas and oil exploration and production assets in one attractive package.

“It’s a pleasant surprise on the upside,” said Michael Worms, an energy analyst with Harris Nesbitt in New York. “There’s no question that this company needs to improve its financial condition and they’re addressing it with these asset sales.”

Calpine Chairman Peter Cartwright, who co-founded the company 21 years ago, pledged before May’s shareholder meeting to shed $3 billion in debt this year and trim $200 million from its annual expenses.

The struggling energy merchant has lost $390 million in the past five quarters, prompting a steep drop in its stock price, which had approached $60 in early 2001 when electricity prices were soaring. Dramatically lower power prices have since zapped Calpine and many other energy wholesalers.

“Owning gas fields isn’t as advantageous as it once was,” said Worms. “Calpine’s core business is generation.”

Calpine is selling some of that, too — it recently announced it would sell four power plants for about $360 million. Worms said the company could expect to lower its annual interest payments by $275 million after trimming its debt.

—The Associated Press