Pogo Producing Co. confirmed Tuesday that it is exploring the possible sale or merger of the company after announcing the sale of Canadian subsidiary Northrock Resources Ltd. for $2 billion in cash to Abu Dhabi National Energy Co. (TAQA).
Pogo purchased the former Unocal Corp. subsidiary just two years ago for $1.8 billion, boosting its reserves by 45% (see Daily GPI, July 12, 2005). Northrock’s properties, which currently produce 29,000 boe/d, are located primarily in Alberta, Saskatchewan and the Northwest Territories. At year-end 2006 Northrock had 706 Bcfe of estimated proven reserves, with 51% of the output and 55% of the reserves in oil. The sale is expected to close in the third quarter.
Pogo CEO Paul G. Van Wagenen said the sale “reflects another very significant step in our strategic alternatives process to unlock unrealized value from Pogo’s asset base.”
Last October, the Houston-based producer announced it would sell noncore North American properties in the Gulf of Mexico, South and East Texas, South Louisiana, the Permian Basin, Texas Panhandle and Western Canada to reduce debt (see Daily GPI, Oct. 19, 2006). At the time, Pogo said it expected to make $700-800 million from all of the sales.
When the Northrock sale is closed, Pogo will be focused in the U.S. onshore, 65% weighted to natural gas, with proven reserves of about 1.3 Tcfe. About 81% of Pogo’s assets will be in its Western Division, including 720 Bcfe in the Permian Basin and Texas Panhandle, 244 Bcfe in the Rocky Mountains and 101 Bcfe in the San Juan Basin. Another 19% of Pogo’s reserves will be located onshore in its Gulf Coast Division, including 180 Bcfe in South Texas. Pogo will have a reserve life of 12 years after the Northrock sale, with oil and gas production of 47,000 boe/d.
In November, New York-based hedge fund Third Point LLC disclosed it had purchased about 4.2 million shares, or a 7.2% stake, of Pogo with options to purchase another 200,000 shares (see Daily GPI, Nov. 27, 2006). Third Point noted at the time that it could hold discussions with third parties or Pogo regarding potential changes to operations, strategy, management or capital structure to enhance shareholder value.
“Combined with our previously announced sales of various noncore assets, mostly in the onshore Gulf Coast area, as well as Pogo’s strategic exit from the waters of the Gulf of Mexico, today’s announcement should deliver meaningful incremental value to Pogo’s shareholders,” Van Wagenen said. “After closing of this transaction, Pogo will have sold approximately 900 Bcfe of proven reserves for about $2.6 billion.”
Pogo said Tuesday “there is no assurance that the exploration of strategic alternatives will result in any further transaction, and Pogo does not expect to make further public comment regarding any such transaction unless and until it enters into a definitive agreement or agreements.”
TAQA CEO Peter E. Barker-Homek said Northrock “is a great addition to one of TAQA’s core businesses — upstream oil and gas producing assets. Northrock Resources comes with a best-in-class team of upstream professionals and well proven producing reserves.” He added, “We see the acquisition of Northrock Resources as a solid base for further investments and growth in Canada.”
TAQA, which was founded in Abu Dhabi in 2005, is a global energy company with operations in power generation, desalination, renewables, upstream oil/gas, pipelines, gas storage and liquefied natural gas.
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