Unocal Merges Permian and San Juan Assets with Titan
Unocal Corp. and Titan Exploration, Inc. announced an agreement
to merge Unocal's oil and gas exploration and production assets in
the Permian and San Juan basins with Titan last week. The new
company, Pure Energy Resources Inc., is expected to be formed after
a Titan shareholder vote during the first quarter of 2000. Unocal
and Titan expect the new company to have a balance sheet valued
between $800 and $900 million.
Unocal will report the financial and operating results of Pure
Energy Resources on a consolidated basis. "The merger will be
accretive to both Unocal and Titan stockholders as a result of
significant synergies and opportunities for profitable growth,"
said Timothy H. Ling, Unocal CFO. "There is significant overlap in
the Unocal and Titan properties, and the operating and
administrative synergies from the merger should result in cost
savings of at least $5 million/year," Ling said.
Jack D. Hightower, current CEO of Titan, will be CEO of the new
company. Hightower said, "The merger improves Titan's current
positioning to increase focus on the Permian and San Juan basins
and other areas where Titan is most competitive. The transaction
improves the quality of our asset portfolio and facilitates
high-grading of our combined opportunity set."
Pure Energy Resources will become one of the largest independent
E&P companies doing business in its core geographic areas. On a
pro forma basis, the new company will have 175 million BOE in
reserves (approximately 80% is proved developed producing) with net
production of approximately 40,000 BOE/day. This production
consists of 60% natural gas and 40% oil on a 6-to-1 Mcf per barrel
When formed, the new company will have approximately 50 million
common shares outstanding. Unocal will hold 65%, or 32.7 million
shares of the new company. Upon approving the merger, Titan's
stockholders will receive 0.4302 shares of Pure Energy Resources,
Inc. stock for every share of Titan they currently hold.
Frank Nuttle, an analyst with PaineWebber inc., said a key
aspect of the deal is the low debt the new company will inherit.
When formed, Pure Energy will have just $90 million in outstanding
debt. "Such a large player is being created. It will be a publicly
traded company and it will have very little debt. It looks like it
will be a very strong platform for future growth. Overall I'd have
to say it looks like the companies will get more out of it than
they put in. It's a two plus two equals four and a quarter
situation, and I think it could go up to five with future
For its part, Unocal is contributing property in the areas that
accounted for almost 74 MMcf/d and more than 9,800 b/d of oil. The
amount of production contributed is proportionate to the amount of
interest Unocal will have in the new company. Barry Lane, a
spokesman for Unocal, said the Midland, TX office will be the most
affected outfit as a result of the deal, but that it was to early
to know of any employee-related moves.
Titan's core area of operations is in West Texas. For the third
quarter of this year, Titan reported production of approximately
9.2 Bcfe. Its average production for the quarter was almost 65
MMcf/d. The company currently has wells drilling or workovers in
progress in the MiVida, Gomez, Evetts, Caprito, Foster and Puckett
Fields in West Texas and in the Brenham Dome area of Central Texas.
The results of most of these operations should be known prior to
Jack Rathbone, former president of Mobil Producing Texas &
New Mexico Inc., will assume the role of executive vice president
of operations and Gary Dupriest, current vice president of Unocal's
Permian operations, will assume the role of vice president of
"This is a great asset base that presents our shareholders with
a balanced portfolio of low-risk development, near field
exploration and higher risk technology plays that provide exciting
opportunities for additional production growth," said Hightower.
While Unocal's Permian and San Juan basin assets will fall to
the new company, Ling said that Unocal's Spirit Energy 76 unit will
continue to be focused on its key Gulf of Mexico growth areas - the
deepwater, shelf, Mobile Bay and onshore. "The structure of Spirit
Energy and Pure Energy Resources, Inc., in Unocal's portfolio will
provide capitalization and cash flow and the right teams to grow
Unocal's Lower 48 oil and gas assets," he said.