Triton Shares Jump With Amerada Hess Deal
News that Amerada Hess would buy Dallas-based independent Triton Energy Ltd. was one of the few bright spots on the New York Stock Exchange last week, with Triton's stock soaring nearly 50% following the announcement last Tuesday, opening at $14.57 and closing at $44.43. New York-based Amerada Hess, one of the East Coast's largest gasoline retailers, said it will pay $3.2 billion in a cash deal that will position it as one of the largest global independent E&P companies. It also agreed to assume $500 million of Triton's debt.
Under terms of the acquisition, Amerada will pay $45 a share for Triton, which is a 50.5% premium over its Monday closing price. The Dallas-based investment firm Hicks, Muse, Tate & Furst Inc. also agreed to sell its 38% stake in Triton to clinch the deal, which is set to close in the third quarter. Hicks Muse invested in Triton, its only oil and gas holding, first in September 1998 for $117 million, and the second time for $217.8 million in January 1999.
Triton posted $328.5 million in revenue in 2000. With the deal, Amerada will increase its production to about 535,000 boe/d in 2002 and more than 600,000 boe/d in 2003, according to CEO John Hess. Amerada's current production level is 425,000 boe/d.
In a conference call with investors, CEO Hess, who took over the old-line company two years ago, said the Triton acquisition will strengthen his company's E&P business, and will "improve our competitive position in a consolidating industry." Amerada, which posted $12 billion in revenue in 2000, expects the deal to increase its earnings by 1% in 2002 and then bring earnings up 4% by 2003, Hess said.
"We will be a much stronger company," Hess said, adding that the Triton deal was what his company had been looking for. He has been quoted in the past as saying he wanted to move the company into more E&P activities.
Triton, which had been struggling with some dry holes in its international exploration efforts of late, hit pay dirt with several discoveries this year, including discoveries off the coast of Equatorial Guinea in West Africa. Just last month, Triton announced a discovery called Okume, nine miles northeast of its first major discovery, the Ceiba Field. All of the company's current oil and gas sales are from production in Colombia and, beginning in the first quarter of this year, Equatorial Guinea. It also holds reserves in Malaysia-Thailand, southern Europe and the Middle East. For the three months ending March 31, revenues rose 94% to $143.9 million. Net income rose 57% to $29.8 million.
Amerada explores, produces, purchases, transports and sells crude oil and natural gas, with its E&P activities paralleling some of the areas Triton explores in. Amerada's E&P activities are found in the United States, United Kingdom, Norway, Denmark, Gabon, Algeria, Azerbaijan, Indonesia, Thailand, Malaysia and Brazil. It also manufactures, purchases, transports, trades and markets refined petroleum and other energy products, owning 50% of a refinery joint venture in the U.S. Virgin Islands. It also has another refining facility, terminals and retail outlets along the East Coast of the United States.
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