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Anadarko to Acquire Kerr-McGee Corporation & Western Gas
Resources, Inc. in Separate Transactions Totaling $23.3 Billion
Friday June 23, 7:16 am ET
HOUSTON--(BUSINESS WIRE)--June 23, 2006--Anadarko Petroleum Corporation
(NYSE: APC):
Deals Create Leading Positions in Two of North America's Most Prolific
Producing Regions
Portfolio to Be Optimized Through Asset Sales
Anadarko Petroleum Corporation (NYSE: APC) today announced it has agreed to
acquire Kerr-McGee Corporation (NYSE: KMG) and Western Gas Resources, Inc.
(NYSE: WGR) in separate all-cash transactions totaling $21.1 billion, plus
the assumption of debt estimated at $2.2 billion.
"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 CEO 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's outstanding deepwater holdings and skill sets will elevate
Anadarko into the top echelon of deepwater operators. Similarly,
Kerr-McGee's long-lived natural gas resource plays in Colorado and Utah,
along with Western Gas Resources' in Wyoming, will combine with Anadarko's
assets to make us one of the largest producers in several of the most
prolific basins in the Rockies. Together, these acquisitions create a more
focused portfolio, which will enhance our ability to deliver very
competitive growth rates and returns."
Hackett emphasized that the transactions are consistent with Anadarko's
strategy, which is built around the company's core competencies in
unconventional resource development and high-impact exploration.
"Two years ago, we unveiled a strategy that included a solid North American
foundation of onshore resource plays, a growing deepwater Gulf of Mexico
program and an expanding international portfolio," he said. "Kerr-McGee and
Western Gas Resources strengthen Anadarko's position on all three counts,
with captured growth projects that are consistent with our core skill sets.
The transactions enable us to create a more focused operating strategy with
a larger and lower-risk asset base."
Hackett said Anadarko will conduct a thorough review of the consolidated
assets to select divestiture candidates, with the dual goals of paring
acquisition-related debt and refocusing the portfolio.
"All three companies have certain assets that we will likely deem to be
non-core once combined," he said. "Even with divestitures that we believe
could generate substantial after-tax proceeds, we expect the proposed
acquisitions to be accretive to both earnings and cash flow on a pro forma
basis."
Anadarko will finance the acquisitions through a $24 billion, 364-day
committed acquisition facility provided by 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.
"Given our outlook for energy markets, these transactions make a lot of
sense for Anadarko shareholders. We expect to hedge up to 75 percent of the
acquired production through late 2008 using a series of three-way collars,
with floors designed to ensure a return on our investment and ceilings that
allow considerable upside," Hackett said. "We also expect cost reductions as
we consolidate certain administrative functions, but the biggest synergies
are expected to come from combining the complementary assets of the three
companies and the skills of their employees. In today's tight labor markets,
gaining qualified people is a bigger focus than achieving cost savings
through consolidation.
"Anadarko is offering Kerr-McGee and Western's shareholders significant
premiums over the companies' recent current stock prices, but looking
backward 30 days results in premiums that are more comparable to precedent
transactions. In any case, we believe we are capturing a substantial
disconnect between current property valuations and equity market valuations,
and gaining some exceptional properties and talent in the process," Hackett
said. "The day-one metrics on proved reserves and daily production are
in-line with other recent transactions. On a full-cycle basis, including the
acquisition and future development costs, we expect to ultimately recover
3.8 billion barrels of oil equivalent (BOE) from the acquired properties at
less than $12.00 per BOE. Opportunities to gain access to such large,
high-margin resource opportunities at such economic full-cycle costs are
rare, and we are excited about the value we expect to create for Anadarko
shareholders."
SUMMARY OF THE KERR-MCGEE CORPORATION TRANSACTION
Anadarko has agreed to acquire Kerr-McGee Corporation in an all-cash
transaction totaling $16.4 billion, or $70.50 per Kerr-McGee share, plus the
assumption of net debt and other liabilities estimated at $1.6 billion.
Kerr-McGee's year-end 2005 proved reserves (excluding pending Gulf of Mexico
shelf divestitures) totaled 898 million BOE, of which approximately 62
percent is natural gas. Proven undeveloped reserves represented 30 percent
of the total. Production in 2006 is expected to be about 92 million BOE,
with natural gas representing approximately 60 percent of the total.
Anadarko expects to ultimately recover more than 3.1 billion BOE on the
Kerr-McGee properties, at a full-cycle cost of approximately $39.2 billion
($12.40 per BOE), including the acquisition cost.
Kerr-McGee's core properties are located in the deepwater Gulf of Mexico and
onshore in Colorado and Utah. They include 504 deepwater Gulf of Mexico
blocks, encompassing seven operated and three non-operated producing fields,
three operated and five non-operated discoveries in varying stages of
development, and four additional prospects that will be drilled this year.
These assets are supported by Kerr-McGee's extensive "hub-and-spoke"
infrastructure, which offers highly cost-effective future development
potential. In Colorado, Kerr-McGee holds 451,000 net acres in the Wattenberg
natural gas play, located largely on the Land Grant, where Anadarko owns the
royalty interest. In Utah, Kerr-McGee holds 237,000 net acres in the Uinta
basin's prolific Greater Natural Buttes gas play.
In addition to its extensive, rapidly growing U.S. portfolio, Kerr-McGee
produces oil and is continuing to develop and explore offshore China, has
made discoveries and is pursuing the development of fields on the North
Slope of Alaska and offshore Brazil, and is exploring offshore Australia,
West Africa and the islands of Trinidad and Tobago.
Anadarko expects to assign almost the entire acquisition price to
Kerr-McGee's oil and natural gas properties. Separate valuations for
Kerr-McGee's extensive "midstream" gathering and processing assets are not
available, since those assets are operated in conjunction with the upstream
properties rather than as a separate business segment.
Refer to the attached schedule for further detail on Kerr-McGee's
properties.
Anadarko's and Kerr-McGee's boards of directors have unanimously approved
the terms of the agreement, and Kerr-McGee's board has recommended that its
shareholders approve the transaction. The agreement includes a right to
match competing offers and a break-up fee of $493 million to be paid under
certain circumstances. The transaction, subject to the approval of
Kerr-McGee shareholders as well as other conditions including customary
regulatory approvals, is expected to close by the end of the third quarter.
For Anadarko, Credit Suisse and UBS acted as financial advisors, Goldman
Sachs provided the fairness opinion and Akin Gump Strauss Hauer & Feld LLP
acted as legal counsel.
SUMMARY OF THE WESTERN GAS RESOURCES, INC. TRANSACTION
Anadarko has agreed to acquire Western Gas Resources, Inc. in an all-cash
transaction totaling $4.7 billion, or $61.00 per Western Gas Resources
share, plus the assumption of debt and other liabilities estimated at $600
million.
Western Gas Resources year-end 2005 proven reserves totaled 153 million BOE,
with proved undeveloped reserves representing 57 percent of the total, while
2006 production is expected to total about 12.5 million BOE. Essentially all
of the reserves and production are natural gas. Anadarko expects to
ultimately recover about 705 million BOE on the Western Gas Resources
properties, at a full-cycle E&P cost of approximately $6.7 billion, or less
than $10 per BOE, including the acquisition cost of the oil and gas
properties.
Approximately $1.6 billion of the total acquisition price will be allocated
to "midstream" gathering, processing and transportation assets. Virtually
all of the remaining value is assigned to two natural gas resource plays in
Wyoming: coalbed methane (CBM) in the Powder River Basin, primarily within
the Big George coals, and tight gas in the Pinedale field.
Western Gas Resources CBM properties within the Powder River Basin are
estimated to hold about 9 trillion cubic feet (Tcf) of original gas in place
and are directly adjacent to Anadarko's assets in this developing play.
Western Gas Resources also has a 10 percent average working interest in
their Pinedale/Jonah joint ventures, which encompass world-class fields
totaling more than 40 Tcf of original estimated gas in place. Anadarko
expects that combining its properties with Western's will accelerate the
development of these natural gas resources and produce strong volume growth
through the end of the decade, and possibly longer, with more than 12,000
identified drilling locations in inventory.
Refer to the attached schedule for further detail on Western Gas Resources'
properties.
Anadarko's and Western Gas Resources' boards of directors have unanimously
approved the terms of the agreement, and Western's board has recommended
that its shareholders approve the transaction. The agreement includes a
right to match competing offers and a break-up fee of $154 million to be
paid under certain circumstances. Holders of 17 percent of Western's
outstanding common shares have agreed to vote in favor of the transaction.
Subject to the approval of Western Gas Resources' shareholders as well as
other conditions including customary regulatory approvals, the transaction
is expected to close by the end of the third quarter.
For Anadarko, Credit Suisse and UBS acted as financial advisors, Goldman
Sachs provided the fairness opinion and Akin Gump Strauss Hauer & Feld LLP
acted as legal counsel.
This news release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Anadarko believes that its expectations are based on
reasonable assumptions. No assurance, however, can be given that such
expectations will prove to have been correct or that the transactions
described above will occur. A number of factors could cause actual results
to differ materially from the projections, anticipated results or other
expectations expressed in this news release. See "Risk Factors" in the
company's 2005 Annual Report on Form 10-K and other public filings, press
releases and discussions with company management. Anadarko undertakes no
obligation to publicly update or revise any forward-looking statements.
ANALYST CONFERENCE CALL TODAY AT 8:30 A.M. CDT, 9:30 A.M. EDT
Anadarko will host an analyst conference call today, Friday, June 23, 2006
at 8:30 a.m. Central Daylight Time (9:30 a.m. Eastern Daylight Time) to
discuss the transactions. The dial-in number is 913-981-4900, and the
confirmation number is 1843925. For complete instructions on how to actively
participate in the conference call, or to listen to the live audio webcast
or a replay, please refer to www.anadarko.com.
MEDIA CONFERENCE CALL TODAY AT 10:30 A.M. CDT, 11:30 A.M. EDT
Anadarko will host a media conference call today, Friday, June 23, 2006 at
10:30 a.m. Central Daylight Time (11:30 a.m. Eastern Daylight Time) to
discuss the transactions. The dial-in number is 913-981-5591, and the
confirmation number is 7678745. This call is for professional working
journalists only. Participants will be required to register prior to joining
the call.
ABOUT ANADARKO
Anadarko Petroleum Corporation's mission is to deliver a competitive and
sustainable rate of return to shareholders by exploring for, acquiring and
developing oil and natural gas resources vital to the world's health and
welfare. As of year-end 2005, the company had 2.45 billion
barrels-equivalent of proved reserves, making it one of the world's largest
independent exploration and production companies. Anadarko's operational
focus in North America extends from the deepwater Gulf of Mexico, up through
the western U.S. and Canadian regions and onto the North Slope of Alaska.
Anadarko's international activities are focused on major positions in North
Africa, the Middle East and Indonesia, as well as exploration or production
operations in several other countries. For more information about how
Anadarko is bringing excellence to the surface, please visit:
www.anadarko.com.
Anadarko Petroleum Corporation
Transaction Details - Kerr-McGee Corporation (NYSE: KMG - News)
Purchase Price
Equity value @ $70.50 / share $16.4 Billion
Assumption of debt and other
liabilities(a) $1.6
-----------------------------------------
Total $18.0 Billion
Purchase Price Allocation
Proven reserves $11.0 Billion
Unproven / leasehold $7.0
Midstream $-
-----------------------------------------
Total $18.0 Billion
Deferred Tax Step-Up $4.5 Billion
Resource Potential
Proven reserves @ YE 2005 898 MM Boe 62% Gas
Probables, possibles 2,245 MM Boe 70% Gas
Future Development Capital
Associated with proven reserves $3.5 Billion
Associated with probables,
possibles $17.4
---------
Total $21.0 Billion
YE 05(b) Est YE 06 1Q2006
Net Proven Net Net
Acreage Reserves Probables Production
Asset Details (M Acres)(MM Boe) (MM Boe) (M Boe/d)
--------------------------------------
Gulf of Mexico (deepwater) 1,667 269 173 87
Uinta Basin, Utah (Natural
Buttes tight gas) 237 153 945 30
DJ Basin, Colorado (Wattenberg
tight gas) 451 234 240 39
Other Rockies 620 45 21 14
Southern Region 1,400 153 125 54
International (includes Alaska) 14,062 44 293 16
----------------------------------------------------------------------
Total 18,437 898 1,797 239
Headquarters Location Oklahoma City
Number of Employees 1,755
--------------------------------------------------
(a) Net of working capital and expected proceeds
for assets held for sale
(b) Excludes GOM Shelf
Anadarko Petroleum Corporation
Transaction Details - Western Gas Resources, Inc. (NYSE: WGR - News)
Purchase Price
Equity value @ $61.00
/ share $4.7 Billion
Assumption of debt
and other
liabilities $0.6
------------------------------
Total $5.3 Billion
Purchase Price
Allocation
Proven reserves $1.7 Billion
Unproven / leasehold $2.0
Midstream $1.6
------------------------------
Total $5.3 Billion
Deferred Tax Step-Up $1.3 Billion
Resource Potential
Proven reserves @ YE
2005 153 MM Boe 99% Gas
Probables, possibles 552 MM Boe 99% Gas
Future Development
Capital
Associated with
proven reserves $0.6 Billion
Associated with
probables, possibles $2.4
---------
Total $3.0 Billion
NSAI YE Est YE
05 06 1Q 2006 2005
Net Proven Net Net Midstream
Acreage Reserves Probables Production Throughput
Asset Details (M Acres)(MM Boe) (MM Boe) (MMcfe/d) (MMcf/d)
-------------------------------------------------
Powder River Basin,
Wy (coalbed methane) 565 57 336 125 433
Green River Basin, Wy
(Pinedale tight gas) 24 88 162 45 443
Other 1,138 9 0 18 544
----------------------------------------------------------------------
Total 1,727 153 498 188 1,420
Headquarters Location Denver
Number of Employees 800
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Contact:
ANADARKO CONTACTS
MEDIA:
Teresa Wong, 832-636-1203
teresa_wong@anadarko.com
or
Susan Richardson, 832-636-1537
susan_richardson@anadarko.com
or
INVESTORS:
David Larson, 832-636-3265
david_larson@anadarko.com
or
Stewart Lawrence, 832-636-3326
stewart_lawrence@anadarko.com
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Source: Anadarko Petroleum Corporation
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