Fir Tree Partners, one of Houston-based Plains Explorations & Production Co.’s (PXP) major investors, announced that it has agreed to support PXP’s proposed acquisition of Pogo Producing Co., saying it has resolved issues that had prompted it to previously say it would vote against the deal.
In a joint statement issued with PXP, Fir Tree said it will vote its shares in support of the acquisition proposal “based on PXP’s continued commitment to implement, following the acquisition, its proven asset rationalization program combined with an ongoing significant share repurchase program and evaluate the necessary steps to achieve MLP valuations by forming a master limited partnership [MLP] or using the MLP market to unlock value for shareholders.”
In September Fir Tree, which owns approximately 9.1% of PXP’s stock, said it would vote against the deal because of the “negative natural gas price environment,” saying large-scale share buybacks would be a better use of the company’s money (see NGI, Sept. 17). Since then Andrew Fredman of Fir Tree said the companies have held “a number of constructive conversations” and have come to “an amicable resolution.”
In July PXP announced plans to bail out its troubled cross-town peer in a stock and cash transaction valued at $3.6 billion (see NGI, July 23). The deal would give PXP estimated proved reserves of 635 million boe and a total estimated reserve potential of 1.4 billion boe of proved, probable and possible reserves. In September Fir Tree said PXP — then trading at about $40.76/share — had lost about $1 billion in shareholder value as a result of the announcement. The market’s immediate response to the announcement was positive; PXP closed last Tuesday at $46.78/share, up $1.94/share on the day, and Pogo stood at $55.82, up $2.06 on the day.
At year-end 2006 pro forma for asset sales, Pogo reported 219 million boe of proved reserves. Pogo owns about 1.9 million gross leasehold acres in oil and gas provinces in the United States, 6.4 million acres in New Zealand and 1.5 million acres in Vietnam.
Pogo management has been under increasing pressure to build value in the company since activist hedge fund Third Point LLC purchased a 7.2% stake in the independent last year, which made it the largest shareholder (see NGI, Nov. 27, 2006). Third Point over the course of several months demanded that Pogo refocus its operations, and it called on CEO Paul G. Van Wagenen to resign. Pogo early this year said it would try to sell the company outright or find a merger partner.
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