Rivals Pogo, Noric to Merge in $750 Million Deal
Houston-based Pogo Producing Co. added to its natural gas asset
base last week, announcing it will acquire cross-town rival Noric
Corp. for $750 million in cash and debt, upping its reserve base by
63% and increasing its projected annual 2000 production by 35% ---
with most of the new assets in natural gas fields in Texas,
Louisiana and the Rocky Mountains. Noric is the parent corporation
of North Central Oil Corp.
Under the deal, Pogo's oil and gas reserves will increase to
1.38 Tcf, adding to profit immediately upon closing, expected in
the first quarter of 2001. Pogo's reserves will stand at 61% gas
and 39% oil following the purchase, and the company expects the
merger to boost earnings 3% to 7.5% in 2001. Profit will be 15% to
20% higher in 2002 and 2005 and at least 30% higher after that.
Calling Noric's track record "enviable," Pogo CEO Paul Van
Wagenen said in a conference call with analysts that Noric had a
"laser focus" on finding proven reserves. "We are not a company
that buys a lot of things," said Van Wagenen. "We looked for a very
long time," before deciding to acquire Noric, he said.
The deal will increase Pogo's proved oil and gas reserves to
1.379 million Bcfe, consisting of 61% gas and 39% oil, up from its
current 847.4 Bcfe, with 44% gas and 56% oil at year-end 1999.
Pogo's projected annual 2000 production will increase to 165 Bcfe
from 122 Bcfe. The deal also extends Pogo's current indicated
reserve life by 20%, to 8.3 years.
Pogo's core exploration regions include the Gulf of Mexico,
offshore Thailand, the Permian Basin of Texas, Hungary, Canada and
the North Sea. Pogo also owns various interests in 106 federal and
state Gulf of Mexico lease blocks offshore Louisiana and Texas.
North Central's core regions are South and East Texas, South
Louisiana and the Rocky Mountains in the Madden Deep Unit. There
are also more than 140 identified exploration drilling locations in
onshore and offshore Gulf Coast regions.
"Pogo has had a record year in terms of both revenues and
production," said Van Wagenen. "Now, through our exciting
combination with North Central, we can look forward to building on
these successes in the years ahead." He said the transaction
enables Pogo to achieve several "key" objectives, including the
"significant enhancement of our long-lived North American natural
gas position and improved exploration and production potential in
our core domestic operating areas in and around the Gulf of
Van Wagenen said Pogo expects to realize additional benefits
from its increased natural gas production, "which we believe will
be the energy commodity of choice for the next several years."
In 1999, Pogo and North Central generated a combined $132.5
million of discretionary cash flow, which is projected to increase
by 185% to $378 million in 2000. Pogo plans to hedge a
"significant" portion of North Central's gas volumes through at
least 2002 to take advantage of the "strong North American natural
gas market," said Van Wagenen.
Noric shareholders will receive $315 million of Pogo stock and
$315 million in cash. Pogo assumes $120 million in debt. Under the
agreement, Pogo will issue approximately 14.2 million common shares
if its average closing price is less than $22.25 in a specific
period before the transaction closes. If the stock price is more
than $27.25, Pogo will issue 11.6 million common shares.
Carolyn Davis, Houston