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Calpine's Domestic Gas, Oil Reserves Fetch $1.05B

Accelerating efforts to slice more debt off its books, Calpine Corp. on Wednesday agreed to sell all of its domestic oil and natural gas assets -- 383 Bcfe -- to an indirect subsidiary for $1.05 billion. The sale is scheduled to close July 7.

Calpine's oil and gas interests are primarily located in the Sacramento Basin of California, South Texas and the Gulf of Mexico, with additional holdings in Colorado, New Mexico and Utah. Its land interests include 386,674 net developed and undeveloped acres and its gas assets currently produce 90 MMcfe/d from 607 net wells.

The San Jose, CA-based company first disclosed that it was considering selling all of its proved reserves in May (see Daily GPI, May 18). After making the announcement, Calpine disclosed in early June that the Securities and Exchange Commission has requested information concerning revisions to its proved reserves as of Dec. 31, 2004 (see Daily GPI, June 10).

Under the latest sales agreement, Calpine's newly formed indirect subsidiary Rosetta Resources Inc. agreed to issue 45.3 million common shares for $725 million. At closing, Rosetta will use the net proceeds from that transaction, together with $325 million of proceeds from a new credit facility, to purchase all of Calpine's production assets. Following the transaction, subject to customary closing conditions, Calpine will no longer own any interest in Rosetta. Calpine did not disclose the names of the principals involved with Rosetta.

The investor acquiring the Rosetta shares was not named in Calpine's statement. A spokesperson also declined to comment and said the placement is still pending.

In a note to clients, Harris Nesbitt analysts said that they were expecting Calpine to receive between $800-900 million for the assets and said the transaction, "once again, in our view, demonstrates Calpine's ability to capture value despite challenging circumstances."

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