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Offshore

Offshore staff

(US, Oklahoma City) - Anadarko Petroleum Corp. announced two multibillion-dollar deals to acquire smaller producers Kerr-McGee Corp. and Western Gas Resources Inc., in a bid to boost its North American output and more than double its annual sales.

Houston-based Anadarko will pay $16 billion in cash, or $70.50 per share, for Oklahoma City-based Kerr-McGee and will assume $1.6 billion in debt and other liabilities. That represents a 40% premium over Thursday's closing price of $50.30 on the New York Stock Exchange.

For independent natural gas explorer Western Gas Resources, Anadarko has agreed to pay $61 per share, or $4.74 billion, and will assume $560 million in debt. That cash offer represents a 49% premium over the company's closing stock price of $40.91 on Thursday.

Of the purchase, Anadarko Chairman, President and CEO Jim Hackett said, "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.''

Hackett went on to say, ''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.''

The deal illustrates that industry executives remain confident that natural gas prices will remain higher than historical levels due to robust demand and flattening output across North America. Imports of liquefied natural gas are on the rise, but building the ships and terminals necessary to support this side of the business takes years and permitting has proven difficult.

Many analysts say that acquisitions remain a quick and easy way for companies to grow, given the rising costs of exploration and the difficulties in gaining access to resources.

''This industry will continue to cannibalize itself because of limited access to new resources,'' Oppenheimer & Co. analyst Fadel Gheit said.

The companies would have combined annual revenue of more than $17 billion. Anadarko, which has 3,300 employees, reported $7.1 billion in 2005 sales. Kerr-McGee revenue totaled $5.93 billion, and Western Gas Resources had $3.96 billion in 2005 sales.

Anadarko is one of the world's largest independent E&P companies, concentrated mainly in North America. Its offshore operations include the deepwater GoM and parts of the Middle East and Asia-Pacific. Anadarko will add Kerr-McGee's core properties, which include assets in the deepwater GoM and onshore in Colorado and Utah. Western Gas Resources' assets are mainly centered in the continental US.

Today's news sent shares of Western Gas sharply higher to $59.80 in electronic premarket trading, up $18.89, or 46%, from Thursday's close. Kerr-McGee shares jumped $18.69, or 37%, to $69.99 in premarket trading, while shares of Anadarko fell $3.64, or 7.5%, to $44.75.

06/23/2006