Houston-based Noble Energy Inc., known for its success in the Gulf of Mexico deepwater, announced Thursday that it is acquiring Denver-based Patina Oil & Gas Corp., known for its success in the Rocky Mountains and Mid-Continent, in a $3.4 billion cash and stock deal. The combined company will have year-end 2003 proved reserves of 710 MMboe, weighted 63% to natural gas, with 55% of the total assets in the United States.
Initial production is estimated at 61,400 bbl/d and 602 MMcf/d, or 161,700 boe/d. Reserve life was 12 years at year-end 2003, with a domestic reserve life of 9.1 years. Concentrated domestic core operating areas are in the Gulf Coast and deepwater Gulf of Mexico, the Rockies and the Mid-Continent. There also are “substantial” exploration and development opportunities in the deepwater and overseas.
“Patina has an outstanding domestic, long-lived natural gas-focused reserve base that will strongly complement Noble Energy’s growing organic onshore, deepwater and international operations,” said Noble CEO Charles D. Davidson. “Patina’s assets are located in some of the most prolific natural gas producing basins in the Rocky Mountain and Mid-continent regions of the United States, where Noble Energy already has initiatives in place to expand operations prior to the transaction.”
Davidson and Patina CEO Tom Edelman presided over a conference call Thursday morning to discuss the transaction.
“By combining Patina’s exceptional inventory of high return onshore development and exploitation projects with Noble Energy’s strong portfolio of attractive exploration and development projects internationally and in the deepwater of the Gulf of Mexico, we instantly achieve a dramatic diversification of our asset base,” said Edelman. “In addition, we gain access to the financing opportunities implicit in Noble Energy’s investment grade rating, while greatly expanding our exposure to high impact exploration projects. Most importantly, these benefits can be achieved without the risks and delays implicit in trying to initiate our own offshore and/or international exploration program.”
In the transaction, Patina will remain in Denver as a subsidiary of Noble, and Patina shareholders will receive about 60% of Noble common stock and 40% cash. Based on closing prices on Wednesday, the acquisition price of $37.89/share represents an 18.7% premium.
While the combined company automatically gives Noble greater access to the Rockies, Noble will continue its expansion into the deepwater in the Gulf of Mexico. Patina, said Davidson, “with its balance sheet, its stability, growth profile, asset quality…really will lend itself nicely to taking on major projects going forward. There is a nice synergistic effect, with Patina’s excellent expertise onshore.”
Davidson said, “Clearly, the main key are the assets, which are important. The thing is, as we’ve dug into them and looked at them, primarily its Patina’s impact…that will continue to generate opportunities.” He noted that Noble was not planning to cherry pick among Patina’s assets and sell off the rest. “This is something that will be in our portfolio for many years,” he said, and along with its properties, is Patina’s “technical and operational expertise in onshore tight natural gas fields.”
Noble’s operations currently are focused in three regions: the Gulf Coast, the Mid-Continent and the Rockies, but the deepwater has been and continues to be the region where it’s put more emphasis in the past few years.
Patina’s properties are concentrated in the Wattenberg Field of the Denver-Julesburg Basin, the Mid-Continent and the San Juan Basin. It operates more than 75% of the 7,750 producing wells in which it holds a working interest. As of Dec. 31, 2003, Patina had more than 4,000 proven development projects in inventory, including 1,400 drilling or deepening locations, 850 recompletions, 1,300 re-stimulation (refrac or trifrac) projects and more than 600 production enhancement projects. Average daily production in 2003 was 274.0 MMcfe, comprised of 15,720 bbl and 179.6 MMcf.
“The addition of Patina’s assets, particularly in the Wattenberg field, when combined with our operations in the Bowdoin field in Montana, the Niobrara trend in eastern Colorado, the Wind River basin in Wyoming and Piceance basin in western Colorado, will create a new core operating area for Noble Energy in the Rocky Mountains,” said Davidson. “Patina’s rapidly growing Mid-Continent assets will become a new core area for Noble Energy as well, providing a platform for long-term production growth.
“After focusing on international expansion for the past several years, we are now adding a large base of long-lived production and low-risk drilling opportunities to complement our high-growth programs,” he said.
Noble expects the acquisition to be immediately accretive to earnings and discretionary cash flow in 2005 and beyond. The deal increases Noble’s domestic reserve life by more than 50%, and Davidson said it will “transform the Rocky Mountain and Mid-Continent regions into substantial new core areas.” The deal also increases worldwide reserves and production by more than 50%, and it balances Noble’s existing reserve base by increasing domestic onshore reserves to 45% of total reserves.
With the acquisition, Noble expects oil and gas production to grow 10% in 2005, with pro forma production between 175,000-180,000 boe/d. Capital spending will increase to $735 million, or $995 million pro forma. Noble executed hedges through 2008 covering volumes averaging approximately 7,000 bbl/d and 80 MMcf/d of natural gas. The hedges are in the form of swaps and include an average New York Mercantile Exchange-equivalent natural gas price of $6.13/Mcf and crude oil price of $38.58/bbl. Patina plans to remove all of its existing natural gas and crude oil hedges in conjunction with the closing of this transaction.
Davidson will remain chairman, president and CEO. Following the completion of the acquisition, Edelman, Patina’s current chairman and CEO, will join Noble’s board of directors, as will one other director from Patina’s board of directors. Edelman also will serve in a special advisory capacity to aid in the integration of the two companies.
Jay W. Decker, Patina’s current president, had already announced he would be leaving the company, however, as a result of this transaction, he agreed to remain for a period of time as a consultant to Noble to facilitate the transition. It is also expected that several of Patina’s existing officers will be joining Noble’s leadership team to help lead the newly combined company. Patina’s current office in Denver will be retained and will serve as a regional office.
The acquisition is subject to the approval of the shareholders of Patina and Noble; the boards of directors of both companies have approved the acquisition. The transaction is expected to be completed in March or April 2005.
Â©Copyright 2004 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.
© 2021 Natural Gas Intelligence. All rights reserved.
ISSN © 2577-9877 | ISSN © 1532-1266 |