Evergreen Resources taps Randall & Dewey to sell Kansas CBM assets

Ray Tyson

Petroleum News Houston correspondent

Coalbed methane producer Evergreen Resources has hired divestiture advisor Randall & Dewey to shop its Kansas assets, a condition of its previously announced $2.1 billion merger with Pioneer Natural Resources.

Under terms of the merger agreement, Evergreen shareholders would receive an additional 35 cents per share, equal to about $15 million in cash, or the proceeds from the sale of the company’s Kansas assets to a third party, whichever is greater.

Evergreen thus far has drilled or acquired 60 wells in the Forest City basin in eastern Kansas. The company holds a 100 percent working interest in 766,000 acres contained in two contiguous development areas, and has spent about $45 million on the project to date.

Evergreen said Randall & Dewey will conduct the data room process, which opened June 9 in Denver. Companies interested in reviewing the data may contact the firm at 281-774-2000. Bids are due June 28, unless regulatory review of the merger allows for more time, Evergreen said.

Closing on the sale of Evergreen’s Kansas properties is anticipated by early August. However, the closing must occur before the closing date of the merger, which is expected this September or October. And the deal is still subject to the approval of the shareholders of both Evergreen and Pioneer.

Upon closing, Evergreen would become a subsidiary of Pioneer, with Evergreen shareholders receiving new shares of Pioneer, valued at $39 per share, plus an extra 35 cents per share should the Kansas assets not sell.

The addition of Evergreen’s overall reserves, essentially all North American natural gas, would increase Pioneer’s proved reserves by about one-third. Evergreen’s year-end 2003 proved reserves of about 1.495 trillion cubic feet of natural gas equivalent are located primarily in Colorado’s Raton basin.