Anadarko to Acquire Kerr-McGee Corporation & Western Gas Resources, Inc. in Separate Transactions Totaling $23.3 Billion
Click here for printer friendly version (PDF) 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)
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)
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
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
SOURCE: Anadarko Petroleum Corporation