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Anadarko to buy two oil rivals
AFP
NEW YORK
Petroleumworld.com 06 24 06
Anadarko Petroleum announced plans Friday to buy rivals Kerr-McGee and Western Gas Resources in separate deals worth a total of 23.3 billion dollars, creating the biggest independent US oil and gas producer.
Texas-based Anadarko said it would acquire Kerr-McGee in an all-cash transaction for 16.4 billion dollars plus the assumption of debt and other liabilities estimated at 1.6 billion.
It will buy Western Gas Resources Inc for 4.7 billion dollars in cash, plus the assumption of 600 million dollars in debt.
"We are creating a combined company with industry-leading positions in the deepwater Gulf of Mexico and the Rockies, two of the fastest-growing oil and natural gas producing regions in North America," Anadarko chairman, president and chief executive Jim Hackett said.
"The core assets being acquired strongly complement Anadarko's existing properties, providing the scale and focus needed to deliver more robust, predictable and efficient growth."
Kerr-McGee, based in Oklahoma City, said its board approved the deal, which offered a 40 percent premium to Thursday's share price.
Luke Corbett, Kerr-McGee chairman and chief executive officer, said, "The merger with Anadarko combines two companies with similar strategies and creates the largest US-based independent exploration and production company."
The move follows a recent consolidation in the oil industry, especially in the exploration area, with the sector reaping strong profits from surging crude prices.
"Higher energy prices have transformed the oil and gas sector, not only swelling balance sheets in cash, but also creating an unwavering need to increase production at a time when finding and development costs are rising," said Kimberly DuBord, analyst at Briefing.com.
"Instead of investing in long-term risky production projects, companies are taking the faster route by buying production assets that immediately add value."
DuBord said more consolidation is to be expected in the sector.
"Today's news underscores a new paradigm in the energy sector," she said.
"Anadarko in one move doubled the size of the company, which speaks to the tight labor conditions and lack of new resource plays in US. Global consolidation within the energy patch that will continue given the current market environment, a reason we remain overweight in the energy sector."
Anadarko will finance the acquisitions through a 24 billion dollar, 364-day credit from UBS, Credit Suisse and Citigroup. Anadarko plans to use proceeds from asset sales, free cash flow from operations and the issuance of equity to reduce debt over the next 18 to 24 months.
AFP 23 1519 GMT 06 06
Copyright ©2006 AFP. All Rights Reserved.
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