Westport Triples Gas Reserves with Belco Purchase

In a $334 million tax-free stock deal that will triple its gas reserves and double its daily production, Denver-based Westport Resources Corp. announced it will buy Belco Oil & Gas, a peer company similar in structure with mirror assets in the Rocky Mountains, Permian Basin, Gulf Coast region and the Midcontinent.

The merger agreement is valued at $922 million, including $588 million of debt, which Westport will assume. The agreement gives Dallas-based Belco shareholders a fixed exchange ratio of 0.4125 shares of new Westport common stock for each share of Belco common stock, while Westport shareholders will receive one share of new common stock for each share of Westport common stock.

Westport's reserves will increase to 1.2 Tcf and it will double its daily production to 346 MMcfe. The merger also will add 703,000 net undeveloped acres, seismic and miscellaneous assets. Daily production volumes from the combined companies over the first quarter of 2001 would jump 93% to 167 MMcfe/d, and add to Westport's current production of 179 MMcfe/d. Probable reserves would increase by 272 Bcfe, and possible reserves would jump 234 Bcfe.

On Dec. 31, 2000, Westport reported a total reserve base of 454 Bcfe of proved reserves, and Belco reported a total reserve base of 726 Bcfe of proved reserves. Pro forma production for the combined company in the first quarter 2001 was approximately 346 MMcfe/d, a 193% increase over Westport's first quarter 2001 rate. About 63% of 2001 production will be natural gas.

"The merger is an excellent fit for both companies," said Westport CEO Donald Wolf, who will become chairman and CEO of the new company. "Belco and Westport have a similar strategic philosophy with a balanced approach between acquisitions, exploitation and exploration. We will also remain balanced with respect to commodity mix, as our pro forma gas-to-toil ration will be 52% based on total reserves."

Wolf said that the two companies would combine "complementary strengths and assets. We are essentially in the same onshore regions, which will enhance our operational, functional and technical expertise." He said the merger also would increase the company's "overall efficiency." Westport's assets are in the same regions as Belco's, with Westport also holding assets in the offshore Gulf of Mexico region.

The boards of directors of both companies unanimously approved the deal, and subject to shareholder and regulatory approval, the merger could close by the third quarter. Belco's current chairman and CEO Robert A. Belfer and vice chairman Laurence D. Belfer will become members of Westport's board.

The Belco Dallas office also will serve as Westport's principal office for Midcontinent, Permian Basin and onshore Gulf Coast exploration and production activities. Westport will maintain its Denver headquarters, as well as its Houston office for offshore Gulf of Mexico activities. Westport also will maintain its name following the merger.

The transaction is expected to be immediately accretive on a per share basis to production, net asset value and reserves.

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