Venoco receives 'Going Private' proposal from CEO

Offer appears financeable, but is it enough? 

By Oil & Gas Financial Journal staff

The board of directors of Venoco Inc. said Aug. 29 that it has received a non-binding proposal from Timothy M. Marquez, chairman and CEO of the company, to take the Denver-based company private. Marquez, who holds approximately 50.3% of Venoco’s outstanding common stock, has proposed to acquire all of the company’s outstanding shares of common stock for $12.50 per share in cash. The offer represents a 39% premium to Friday's close and a 27% premium to average August price. 

Four years after the company went public, Marquez spoke to OGFJ about the advantages and disadvantages of being a California pure-play company. Read the interview here

In response to Marquez's offer, Venoco’s board is in the process of forming a special committee of independent directors to consider the proposal, which will be comprised of all of the directors of the company other than Marquez. The committee will retain independent financial advisors and legal counsel to assist it in its work. The board of directors cautions Venoco shareholders and others considering trading in their securities that it has only received the proposal and that no decision has been made with respect to the company’s response to the proposal. In addition, the board said that there is no assurance that any definitive offer will be made, that any agreement will be executed, or that this or any other transactions will be approved or consummated.

Is it enough?
The offer is contingent on Marquez obtaining financing on acceptable terms. The offer, while most likely financeable according to an August 29 research note by Jefferies & Co. Inc., may not be enough, the analysts continued. 

Jefferies estimates Venoco’s proved-only value at $11-12/share (based on YE12 estimated reserves and $85 oil), including an estimated $200 million proceeds for the sale of its interest in the Hastings field to Denbury Resources in February 2009. According to Jefferies analysts, the current offer “does not seem to include significant credit for the company’s Monterey Shale exploration program,” noting its current price of $16 includes $4-$5/share of potential Monterey value. Despite Jefferies’ view that the Monterey “looks more like conventional exploration than a resource play,” the analysts noted that “current investors will likely require some premium for the company’s exposure to the play, especially considering the stock was trading above the $12.50/shr bid less than a month ago, before the recent market downturn.” 

Venoco is an independent energy company primarily engaged in the acquisition, exploration, exploitation, and development of oil and natural gas properties, primarily in California. Venoco operates three offshore platforms in the Santa Barbara Channel, has non-operated interests in three other platforms, operates three onshore properties in Southern California, and has extensive operations in Northern California's Sacramento Basin.



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