Anadarko Beats Out Hunt for Berkley Petroleum
Just days after Houston-based Anadarko said it would boost its spending in Canada this year (see NGI, Feb. 12), the independent played white knight last week, agreeing to acquire gas-rich Berkley Petroleum Corp. for $777 million, further boosting its Canadian reserves and pulling the rug out from under another Texas-based producer that had set its sights on the company two months ago.
The deal, which has already been unanimously approved by both directors' boards, would pay Berkley shareholders the equivalent of C$11.40 per share in cash. Anadarko also would assume about $250 million in Berkley debt. Anadarko's offer exceeded by about 10% a competing takeover bid by Dallas-based Hunt Oil Co. made Feb. 5. Berkley's board recommended that shareholders approve the deal.
For the bridesmaid Hunt, a subsidiary of Hunt Consolidated Inc., the accepted Anadarko offer squashed a three-month long plan to boost its Canadian reserves by adding Berkley, which began in December. The bid was knocked back by Berkley, which called the initial offer too low and, among other things, opened its data rooms in January in an effort to lure other buyers and then unanimously rejected Hunt's offer (see NGI, Jan. 22). Hunt owns about 10% of Berkley's stock; the bid by Anadarko requires that 66.67% of the shares of Berkley be tendered.
Berkley's assets stretch from Western Canada to California; its Canadian assets would become part of Anadarko's existing Canadian company, Anadarko Canada Corp., headquartered in Calgary. Berkley's exploration and production focuses on properties situated near existing Anadarko properties in the Western Canadian Sedimentary Basin in Alberta, northeastern British Columbia, the Northwest Territories and southeastern Saskatchewan.
Anadarko estimates that Berkley holds 95 MM boe of net proved reserves (after royalties), of which 70% is natural gas. Current average daily net production is 10,900 bbl and 116 MMcf of natural gas (14,500 bbl and 155 MMcf/d on a working interest basis). Berkley has 140 total employees, which Anadarko expects to keep. Anadarko did not detail how Berkley's properties outside of Canada will fit into its business, and said those plans will be announced in the future.
Although smaller in size, the Berkley acquisition would be the second into Canada for Anadarko in less than a year. Anadarko bought Union Pacific Resources last year for about $4.4 billion in stock (see NGI, April 10, 2000). The UPR deal made Anadarko the sixth largest natural gas producer in North America and gave it the fifth largest natural gas reserves. Counting Berkley's acreage, Anadarko would hold 4.7 million acres net (3.5 million undeveloped net, 1.2 million developed net) in Canada in all of the major Canadian exploration gas plays, particularly in northeastern British Columbia, the Alberta foothills, the Northwest Territories, the Scotian Shelf and the Mackenzie Delta.
Anadarko CEO Robert J. Allison called the Berkley acquisition a "great deal. It fast tracks growth of our Canadian natural gas business. In addition to being a good fit with our existing strategy, the deal meets our basic criteria because it is accretive to earnings, cash flow and growth."
Jim Emme, the Anadarko Canada Corp. president, said, "both companies have a common vision to grow through exploration. Our plays and acreage are complementary." He said that since the merger with UPR, Anadarko had implemented plans to grow its Canadian gas reserves. "This deal accelerates our long-term strategy by at least three years."
Anadarko said it would mail its offer by this Friday (Feb. 23), which would remain open for 21 days from the date of mailing. Berkley has agreed to discontinue its efforts to seek and consider strategic alternatives, to close its data rooms, not solicit other proposals and to provide Anadarko the right to match competing offers. In certain circumstances, if Anadarko's offer is not completed, Berkley has agreed to pay a break fee of C$48 million to Anadarko.
Carolyn Davis, Houston
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