Goldman Sachs Group Inc. and Morgan Stanley are said to be in talks to make a bid for Dominion Resources Inc.'s exploration and production (E&P) assets (see Daily GPI, Sept. 7, 2006). According to a report in The Wall Street Journal, the two banks are putting together a deal that could top $15 billion.
The newspaper said Goldman and Morgan Stanley have put together a private equity group that includes Madison Dearborn Partners, Warburg Pincus, First Reserve and the Carlyle Group. Another private equity group, which includes Blackstone Group LP, Texas Pacific Group and Kohlberg Kravis Roberts & Co, also is considering an offer for Dominion's E&P business, the report indicated.
Dominion Resources CEO Tom Farrell said last November that the Richmond, VA-based company was reviewing all of its assets, with a plan to sell most of the E&P business to refocus on its utility operations, which are the second largest in the United States after Exelon Corp.
The E&P asset sale process is expected to begin next month with completion by mid 2007.
Dominion's E&P assets are managed by Dominion subsidiary Dominion Exploration & Production Inc., one of the largest independent E&P companies in the United States. Excluding the Appalachian Basin, Dominion's proved reserves as of Sept. 30, 2006, totaled 5.5 Tcfe. Its reserves are located in the deepwater Gulf of Mexico, West Texas, the MidContinent and Rockies and the Western Canadian Sedimentary Basin. About 76% of the reserves are natural gas. Average daily production coming from the non-Appalachian Basin properties, as of Sept. 30, 2006, totaled 1,175 MMcfe/d.
"Following a sale, our remaining E&P reserves of about 1.1 Tcfe would fit well geographically and operationally with our natural gas pipeline, storage and gathering businesses," Farrell said when the sale was announced last November. "They have a risk profile more consistent with the risk profile of Dominion's other businesses."
Farrell also said last year that the company was considering the sale of other nonstrategic assets, including local distribution companies and power plants. The company owns about 7,800 miles of natural gas pipeline and the nation's largest natural gas storage system, with about 950 Bcf of storage capacity. The portfolio also includes about 28,100 MW of power generation and 6,000 miles of electric transmission lines.
No private equity group has attempted a target as large as Dominion, according to The Journal. "A deal would rival such recent energy acquisitions as Anadarko Petroleum Corp.'s $16.4 billion purchase of Kerr-McGee Corp. last year and Chevron Corp.'s $18 billion acquisition of Unocal Corp. in 2005," the newspaper noted.
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