Houston-based independent Cabot Oil & Gas Corp. said Tuesday it will sell its Gulf Coast offshore portfolio and South Louisiana properties to newly launched Phoenix Exploration Co. LP for $340 million. With the sale, Cabot will be 96% weighted to natural gas, with all of its operations concentrated onshore in North America.
Cabot bought most of the assets it is selling in 2001, when it merged with Cody Co., the parent company of Denver-based Cody Energy LLC (see Daily GPI, June 22, 2001). Phoenix was formed earlier this year by former executives of Gryphon Exploration Co., receiving its initial funding of $250 million from private equity heavyweights Carlyle/Riverstone Global Energy and Power Funds (see Daily GPI, April 21).
At year-end 2005, the assets Phoenix is buying held an estimated 73 Bcfe in proved reserves. However, between the end of 2005 and Aug. 1, Cabot identified 30 Bcfe of new proved undeveloped reserves (PUD), recorded 6 Bcfe of positive reserve revisions, and produced 11 Bcfe on the properties to be sold, so reserves at the effective date total 98 Bcfe. However, because Cabot reconciles PUDs only at year-end, the reserves to be sold would total 68 Bcfe on Cabot’s books at the end of 2006, CEO Dan O. Dinges said.
Dinges cited Cabot’s growing emphasis on its resource-focused portfolio as a reason for the asset sale. “In a market where there is a significant disconnect between asset sales values and implied stock prices, we took advantage of an opportunity to accelerate our realizations on these assets and further solidify our long-term objectives.”
The sale is expected to close by Sept. 29. With the proceeds, Cabot intends to repurchase its common stock, fund its operations, repay a portion of its outstanding debt and pay the resulting tax bill.
“For the last year, as we have spoken about our move toward a more predictable portfolio of opportunities, we have been asked repeatedly about selling these reserves,” said Dinges. “We received significantly more value for these reserves than their current valuation within our company as indicated by our current stock price.”
The assets averaged 49.4 MMcfe/d of production in the first seven months of 2006. Following the sale, Cabot’s total proved reserve portfolio and its production profile will be 96% natural gas.
“With this sale, the company still expects to show year-over-year production growth in absolute terms,” said Dinges. “On a pro forma basis, removing the sold production from this year and all of last year, the growth rate for production will be double digits for 2006.”
With the sale of its Gulf Coast operations, Cabot’s core operations will be focused on nearly 1.2 Tcfe of proved reserves located in the Rocky Mountains and MidContinent, Charleston, WV, and in the Western Canada Sedimentary Basin. Cabot also operates 2,500 miles of pipeline and 4 Bcf of storage capacity in its East Region.
The Cabot purchase increases Phoenix’s growing offshore business. The Houston-based producer recently was the apparent high bidder for several blocks in the Minerals Management Service’s Western Gulf of Mexico Lease Sale 172 held earlier this month (see Daily GPI, Aug. 18). According to preliminary statistics, Phoenix was high bidder for High Island block 108, agreeing to pay $1.312 million for leasing rights. Phoenix, with a 33% stake, along with 66% stakeholder Callon Petroleum Operating Co., also were apparent high bidders for High Island block 200 with a joint bid of $1.144 million.
Phoenix, holding a 66% stake, along with 33% stakeholder Callon, also apparently obtained three Matagorda Island blocks in the lease sale: 679, $202,525; 707, $174,610; and 712, $447,750. They also were apparent high bidders for Brazos Area, South Addition block 103 with their bid of $162,330.
Goldman, Sachs & Co. and Fulbright & Jaworski LLP advised Cabot on the sale.
©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |