Barrett to Consider Shell's New Offer

Is that an "I told you so" coming from the Barrett Resources board room? On Thursday, Royal Dutch/Shell raised its bid $5 a share for the Denver-based independent, valuing the gas-rich company at $2.01 billion. Shell launched a hostile takeover bid in March for $55 a share, but Barrett had said the offer was too small (see NGI, March 12). With the new offer of $60 a share on the table, Barrett said it now will take the offer into consideration.

Since Shell first launched its bid for the Denver independent, the two have been playing tug of war with shareholders, with Shell standing its ground at $55 a share and Barrett saying the offer was "inadequate." Early last week, however, Barrett seemed to gain ground when the Colorado Oil and Gas Conservation Commission approved a 20-acre increased density drilling covering 16,000 acres of federal lands in the Piceance Basin.

Barrett said a review by independent reservoir engineers raised the company's oil and gas reserves to 2.1 Tcfe, of which 96% is natural gas. Its previous estimate was 1.37 Tcfe. The Colorado commission ruling allowed Barrett to add 212 Bcf of proved gas reserves from 202 additional well locations in the basin.

"These reserve additions demonstrate the inherent quality of our core holdings in the Rocky Mountains and the success of our exploration and development strategy," said CEO Peter Dea. He said the board of directors' recognition of Barrett's "high quality asset base" was a factor in its decision to reject Shell's unsolicited offer of $55 per share as inadequate and to pursue a process it said would maximize shareholder value.

"That previously announced process is proceeding expeditiously," Dea said. "We are committed to attaining a full appreciation of our assets for our shareholders." Shell's offer for the independent also was extended until May 4. As of April 19, only 155,420 of Barrett's 33.8 million shares had been tendered to Shell. Following the reserve ruling, Barrett was raised to "market perform" by Frost Securities.

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