Unocal's Northrock Issues Bid for Gas-Rich Tethys

Unocal Corp. said on Friday that its Canadian subsidiary, Northrock Resources Ltd., has entered into an agreement via a take-over bid offer to acquire all of the common shares of Tethys Energy Inc., a Calgary-based oil and gas exploration company operating in Western Canada, for approximately C$144 million (US$93 million).

Northrock said the offer price for each Tethys share will be C$4.25 (US$2.74) in cash. Tethys has 33.9 million shares outstanding on a fully diluted basis. In addition, Northrock will assume Tethys' existing long-term debt of approximately C$30 million (US$19 million). The offer will be conditional on at least 66-2/3% of Tethys' shares being tendered under the offer. Tethys has also agreed that it will not solicit competing offers and will pay a C$6.5 million (US$4.2 million) non-completion fee under certain circumstances.

"The acquisition of Tethys will not only build on Northrock's active exploration and development initiatives in our core areas, but will also provide us with entry into new and exciting growth areas," said Don R. Hansen, Northrock's CEO. "Tethys' focused asset base is complementary to Northrock's operations in Western Canada, providing significant operational synergies with existing activity in Northrock's West-Central Alberta and Southeast Saskatchewan core areas."

Northrock said that based on an independent reserve report and successful exploration and development activity in 2001, Tethys has proved reserves (U.S. basis) of 12 mmboe on a 6:1 net basis. More than 60% of the reserves are reported to be liquids-rich natural gas.

The total acquisition cost estimated by Northrock is C$13.34 per boe (US$8.60), after attributing value to Tethys' 165,000 net acres of undeveloped lands and its seismic position. Tethys' current production is 4,600 boe/d (6:1 net basis), including 16 MMcf/d of natural gas production.

"We expect to increase production to more than 6,000 boe/d from the Tethys properties by the end of this year," Hansen said. "Most of this additional production will be natural gas."

Unocal said the bid has the unanimous support of the Tethys board of directors, which in turn said it will recommend that stockholders accept Northrock's offer. Tethys directors, officers and major stockholders, who have an aggregate of approximately 12.1 million Tethys shares and 2.9 million options and warrants representing 44% of the fully diluted number of Tethys shares), have agreed to tender and not withdraw those shares under the offer.

Tethys said the transaction represents the culumation of a process announced on March 22, 2001 to identify and evaluate potential sale opportunities. Randell Pardy, CEO of Tethys stated, "We are pleased with this offer from Northrock. It recognizes fair value for Tethys shareholders and provides price certainty and liquidity to all shareholders."

Northrock said it intends to mail the offer to Tethys shareholders by June 4, 2001, with a closing date expected in mid-July.

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