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Monterey Shale Independent Venoco to Go Private

Denver-based Venoco Inc., an independent exploration and production (E&P) company in California's oil-dominated Monterey Shale, said Monday CEO Tim Marquez intends to buy back all the publicly held shares of the company he founded, subject to shareholder and regulatory approvals.

The deal is contingent on a majority of the minority (49.7%) outstanding shares approving the sale, along with Securities and Exchange Commission and Department of Justice approvals. On a separate track Marquez will have to line up the financing to complete what is estimated to be a roughly $735 million transaction, or $12.50/share, a 63% premium on the company's closing stock price last Friday.

In a related move, the company said Tuesday a new COO has been named, Ed O'Donnell, who will eventually become CEO when Marquez takes a new position of executive chairman of the board in the third quarter.

Standard & Poor's Ratings Services (S&P) said Wednesday it was putting Venoco's ratings, including its "B" corporate rating, on negative CreditWatch, pending further information on the financing for the deal. S&P estimated the total purchase price at $1.45 billion, including $685 million of debt.

A special committee of the board of directors was formed last August to review Marquez's proposal with help from independent legal and financial advisers, BofA Merrill Lynch and Strategic Energy Advisers LLC on the financial side, and Squire Sanders as legal advisers. Marquez has retained separate advisers, Wachtell, Lipton, Rosen & Katz (legal), and Citigroup and BMO Capital Markets for financial help.

Marquez, who along with affiliated trusts and foundations owns 50.3% of the common shares of the company he founded, seeks to acquire the outstanding Venoco shares through a wholly owned entity called Denver Parent Corp. Venoco's principal focus is in California -- acquiring, exploring and developing oil and natural gas properties, including three offshore platforms in the Santa Barbara Channel, onshore in the Monterey Shale, and extensive operations in the Sacramento Basin.

Last summer Marquez said at the Enercom Conference in Wyoming that the federal Energy Information Administration current estimates of the Monterey Shale are "greatly understated." But he also has said that Venoco's first attempts at horizontal exploratory drilling in the Monterey were unsuccessful. For now they are only drilling conventional, vertical wells (see Shale Daily, Sept. 13, 2011).

Financial reports Tuesday said Venoco shares rose 38% to $10.62 in Tuesday morning trading on Marquez's offer to buy all of the company shares he doesn't already control.

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