Houston-based Pogo Producing Co. added to its natural gas assetbase last week, announcing it will acquire cross-town rival NoricCorp. for $750 million in cash and debt, upping its reserve base by63% 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 corporationof North Central Oil Corp.

Under the deal, Pogo’s oil and gas reserves will increase to1.38 Tcf, adding to profit immediately upon closing, expected inthe first quarter of 2001. Pogo’s reserves will stand at 61% gasand 39% oil following the purchase, and the company expects themerger to boost earnings 3% to 7.5% in 2001. Profit will be 15% to20% higher in 2002 and 2005 and at least 30% higher after that.

Calling Noric’s track record “enviable,” Pogo CEO Paul VanWagenen said in a conference call with analysts that Noric had a”laser focus” on finding proven reserves. “We are not a companythat buys a lot of things,” said Van Wagenen. “We looked for a verylong time,” before deciding to acquire Noric, he said.

The deal will increase Pogo’s proved oil and gas reserves to1.379 million Bcfe, consisting of 61% gas and 39% oil, up from itscurrent 847.4 Bcfe, with 44% gas and 56% oil at year-end 1999.Pogo’s projected annual 2000 production will increase to 165 Bcfefrom 122 Bcfe. The deal also extends Pogo’s current indicatedreserve 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 andthe North Sea. Pogo also owns various interests in 106 federal andstate Gulf of Mexico lease blocks offshore Louisiana and Texas.North Central’s core regions are South and East Texas, SouthLouisiana and the Rocky Mountains in the Madden Deep Unit. Thereare also more than 140 identified exploration drilling locations inonshore and offshore Gulf Coast regions.

“Pogo has had a record year in terms of both revenues andproduction,” said Van Wagenen. “Now, through our excitingcombination with North Central, we can look forward to building onthese successes in the years ahead.” He said the transactionenables Pogo to achieve several “key” objectives, including the”significant enhancement of our long-lived North American naturalgas position and improved exploration and production potential inour core domestic operating areas in and around the Gulf ofMexico.”

Van Wagenen said Pogo expects to realize additional benefitsfrom its increased natural gas production, “which we believe willbe the energy commodity of choice for the next several years.”

In 1999, Pogo and North Central generated a combined $132.5million of discretionary cash flow, which is projected to increaseby 185% to $378 million in 2000. Pogo plans to hedge a”significant” portion of North Central’s gas volumes through atleast 2002 to take advantage of the “strong North American naturalgas 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 theagreement, Pogo will issue approximately 14.2 million common sharesif its average closing price is less than $22.25 in a specificperiod before the transaction closes. If the stock price is morethan $27.25, Pogo will issue 11.6 million common shares.

Carolyn Davis, Houston

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