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Anadarko, Union Pacific to merge in stock-to-stock deal Companies form $9 billion independent exploration and production company; will be sixth largest U.S. gas producer Petroleum News Alaska
Anadarko Petroleum Corp. and Union Pacific Resources Group Inc. said April 3 that they will merge, creating “one of the largest independent exploration and production companies in the world in terms of 1999 reserves, production and drilling activity.”
The combined company will be called Anadarko Petroleum Corp. and will be headquartered in Houston. Following the merger, Union Pacific will be a wholly owned subsidiary of Anadarko.
Anadarko has the fourth largest state oil and gas acreage position in Alaska. Union Pacific has no Alaska interests, but was a leaseholder in Milne Point from 1980 to 1985.
Anadarko shareholders get 53 percent Under the agreement, which was unanimously approved by each company’s board of directors, Anadarko shareholders will hold approximately 53 percent of the combined company and Union Pacific shareholders approximately 47 percent.
Based on the Anadarko closing price of $38.6875 on March 31, the combined company will have a market capitalization of more than $9 billion. Based on this closing price, the transaction has an implied value to Union Pacific shareholders of $17.60 per share, representing a 21 percent premium to Union Pacific’ closing price on March 31.
Deal needs shareholder approval The stock-for-stock deal is subject to approval by shareholders of both Union Pacific and Anadarko and customary regulatory approval.
Robert J. Allison Jr. will continue to be chairman and chief executive officer of Anadarko. George Lindahl III, chairman, president and chief executive officer of Union Pacific, will become vice chairman of Anadarko. Five members of Union Pacific’ board of directors will join the Anadarko board, subject to Anadarko shareholder approval of the larger board.
“This merger is an excellent fit for both companies,” Allison said. “We blend Anadarko’s strengths in exploration with what UPR does best — profitable exploitation with industry-leading drilling and completion technology. The new Anadarko will have the financial strength to aggressively pursue a broader portfolio of projects. We can accelerate activity in the most prospective areas. ... We do expect some modest cost reductions with the merger, but that’s not what drives this dea. It’s about complementary skills and assets that can give us dramatic growth and profitability. ... Given the current outlook for energy markets, now is the time to step up the pace of drilling for new energy reserves — particularly North American natural gas.”
Proved reserves in crude and gas The combined companies’ proved reserves will be equally split between crude oil and natural gas and equivalent to 1.94 billion barrels of oil or about 11.65 trillion cubic feet of gas. About 80 percent of total reserves are in North America and 20 percent in international areas.
At current expected production rates, the companies said, the combined reserve life index would be 10.8 years.
To date, Anadarko has identified more than 100 exploration prospects from the combined companies’ portfolio with over 11 billion barrels of net un-risked reserve potential.
In the United States the new Anadarko sees significant reserve potential in several exploration plays in Texas, the Gulf of Mexico (conventional, sub-salt and deepwater plays), Alaska and the Rocky Mountain areas.
In foreign exploration, the combined portfolio will include projects in Canada, the Sahara Desert of Tunisia, the North Atlantic Margin and Latin America.
The companies said that the Anadarko will now have the financial strength to aggressively pursue additional exploration ventures worldwide.
Major role in gas market The new company will play a major role in the growing North American natural gas market. Based on 1999 data, Anadarko will now rank as the sixth largest natural gas producer in North America, and the fifth largest holder of natural gas reserves.
The new Anadarko will hold significant acreage positions and drilling opportunity in most of the high-potential, gas-rich basins of North America, including Western Canada and the U.S. basins of the Rocky Mountains, the Mid-continent, Texas, and the Gulf of Mexico. These basins today account for 90 percent of U.S. gas supply.
Alaska a development area Construction and development drilling are under way to commercialize recently discovered oil and gas fields in Alaska (Alpine on the North Slope and Moquawkie on the west side of Cook Inlet), Algeria and the Gulf of Mexico.
In addition, Anadarko plans large development drilling projects to increase oil and gas production in Texas (the Carthage, Ozona and Giddings Fields); in Wyoming (the Wamsutter Field) and in Canada (the Hatton and Jedney fields). In 2001, these development projects should generate over 10 million BOE of new production with even higher levels in 2002.
Anadarko said significant growth opportunity has been identified in existing fields, where in-fill and step-out drilling, state-of-the-art technologies in reservoir engineering, drilling, completion and production can be used to extend field limits, increase production and recover more reserves. Many projects represent a blend of exploration and development such as the Bossier Play in East Texas.
To date, Anadarko has identified over 50 such projects in the inventory of the combined company. Net potential reserves from these projects are 1 billion BOE (un-risked).
On Alaska’s North Slope, Anadarko is a 22-percent partner in ARCO Alaska Inc.’s Alpine field east of NPR-A. The company signed an exploration agreement with the Arctic Slope Regional Corp. in August 1998 covering about 3.3 million acres in the foothills of the Brooks Range. Anadarko also holds exploration leases in the Beaufort Sea and on the North Slope.
In Cook Inlet, where Anadarko has partnered with ARCO Alaska, Anadarko was the operator of the Lone Creek well, at which the companies announced a gas discovery in the fall of 1998 at the Moquawkie field on a Cook Inlet Region Inc. lease on the west side of Cook Inlet about 40 miles west of Anchorage. Anadarko and ARCO Alaska each hold a 50 percent working interest in the Moquawkie discovery and jointly hold approximately 56,000 leasehold acres in the Moquawkie area and 178,000 acres in the Cook Inlet area.
Anadarko holds net 237,824 acres of state leases in Alaska, as well as 181,000 net acres of federal leases in the National Petroleum Reserve-Alaska and outer continental shelf acreage in the Beaufort Sea. Anadarko is the operator of the Thetis Island exploration unit in the Beaufort Sea.
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