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Pioneer picks up Evergreen in $2.1 billion transaction Deal was the third time in the past month a Denver-based firm has been snapped up Petroleum News
In a bid to boost its reserves and output of natural gas, Pioneer Natural Resources Co. announced a deal May 4 to buy Evergreen Resources for about $2.1 billion in cash, stock and assumed debt — the third buyout of a Denver-based petroleum producer in the past 30 days.
The deal would give Dallas-based Pioneer, a fast-growing independent producer, “low-risk” natural gas assets in a key development area of the Rockies, the company said, adding 2.4 trillion cubic feet of proved and probable reserves North America gas reserves to Pioneer’s portfolio and enhancing the independent’s Canadian asset portfolio, the smallest of its asset bases.
“We regard this as a strategic merger and believe there are a lot of synergies in both companies,” Evergreen chairman and CEO Mark Sexton said
The Pioneer proposal offers no premium on Evergreen shares and investors and initially sent both companies’ shares down on the news. Evergreen stock fell $1.64, or 4 percent, to close at $38.99 on the New York Stock Exchange, where Pioneer shares fell 92 cents, or 3 percent, to close at $32.60.
Under the terms of the agreement, Evergreen shareholders have three options for swapping their shares: 1.1635 Pioneer shares in exchange for each Evergreen common share, which at May 4’s closing price worked out to $37.93 per share; $39 in cash per Evergreen share; or 0.58175 of a Pioneer share and $19.50 cash per Evergreen share, which equaled $38.47 at Tuesday’s prices.
Energy analyst Fadel Gheit of Oppenheimer & Co. said both companies would benefit from the merger. He was not surprised by the drop in stock prices.
“Speculation or rumor had driven the price up in the past few weeks after the earlier mergers,” he said. “People loaded up on it (the stocks), now they are pulling out. They took the money and ran.”
It was the third time in the past 30 days a Denver-based oil and gas company has been acquired, a development that Gheit called “the beginning of a trend.”
“You have sellers that are motivated basically by fear of a potential drop in oil and gas prices,” he said. “Buyers are motivated by a lack of opportunities. There aren’t too many open areas left for them.”
In earlier deals involving Colorado energy companies, Canadian energy giant EnCana Corp. announced plans on April 15 to buy Denver-based Tom Brown Inc. in a $2.2 billion cash deal to boost its assets in Colorado, Wyoming and Texas. Kerr-McGee Corp. said on April 7 it is buying Denver-based Westport Resources Corp. in a stock deal worth about $2.4 billion.
Evergreen’s year-end proved reserves were 1.5 trillion cubic feet of natural gas equivalents concentrated in the Raton and Piceance-Uintah basins in the Rockies and southern Canada. Evergreen has agreed to sell its Kansas assets before the merger is finalized, which is expected to be by Sept. 30. More aggressive development Pioneer chairman and CEO Scott Sheffield briefly mentioned Alaska in an audio web cast May 4, saying both he and Sexton were enthused by their opportunities in the state where Pioneer holds North Slope properties and Evergreen has coalbed methane properties in Southcentral Alaska.
Sexton, who is out of a job but will sit on Pioneer’s board, said the merger will result in “more aggressive development” of Evergreen’s properties.
Pioneer officials predicted Evergreen production will double between now and 2008 and Pioneer production will grow by an average of 10 percent per year over next 10 years.
The combined company would be based in Dallas. Sheffield said he expects to retain most employees and to maintain an office in Denver.
The merger must be approved by shareholders of both companies.
—The Associated Press contributed to this article
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