Royal Dutch/Shell Group last week agreed to buy the British-based Enterprise Oil Plc in a cash deal worth $5 billion, which would be a 15% premium to Enterprise’s closing share price March 29. Enterprise would add about 6% to Shell’s output and boost its presence in the North Sea, Italy, Brazil and the Gulf of Mexico, which has been an emerging frontier for the independent. Overall, Enterprise produced almost 243,000 boe/d in 2001.

Enterprise’s presence in the Gulf of Mexico was established in 1996 through strategic alliances including, ironically, PennzEnergy Co. (now Pennzoil-Quaker State), which Shell also intends to acquire (see NGI, April 1). Currently, Enterprise has interests in approximately 119 blocks in the Gulf. Last May, Enterprise also took over operatorship of the Llano field from EEX Corp., and also operates the Gyrfalcon gas field. It also holds significant interests in the Boomvang development, Garden Banks 161 producing oil field, as well as a range of exploration acreage in the Gulf.

Gyrfalcon is a gas field with reserves of 3 MMboe, located 130 kilometers offshore Louisiana in the Green Canyon 20 block. The field is 100% owned and operated by Enterprise and produces through a single well tied back to Shell’s nearby Boxer platform. The field came on stream in December 1999 and currently produces 3.5 MMcf/d.

The Boomvang field covers five blocks including East Breaks 641, 642, 643, 688 and 732, and is located 160 kilometers south of Galveston. The blocks lie in approximately 3,450 feet of water and the field has estimated reserves of between 70-100 million boe. Enterprise acquired its 50% interest in the field from R&B Falcon in July 2000, and the field is operated by Kerr McGee Corp., with Ocean Energy as the third partner in the venture. Peak production is expected to reach 25,000 bbl/d 150 MMcf/d in 2003.

The Garden Banks 161 discovery, made in January 1997, has been developed as a phased subsea project tied back to the nearby Garden Banks 72 platform with production commencing in September 1999. The two well development currently produces about 1,500 boe/d. Enterprise owns 65%, while Devon Energy Corp. owns 35% interest.

“We’re getting an attractive, incremental upstream deal for our shareholders at a fair price, an excellent set of assets and strong future cash flow,” said Phil Watts, Shell’s chairman. He said Shell expected about 90% of the expected $300 million of annual cost savings would be delivered in the first full year of ownership, “because there is a such a clear strategic fit between these assets.” The acquisition is expected to raise Shell’s earnings before amortization costs from 2003.

Enterprise’s CEO Sam Laidlaw, who was appointed earlier this year, said in February that the company had a new strategy to fend off takeover bids and guarantee a future for the 18-year-old company. Enterprise was a spinoff from the former British Gas privatized system. Enterprise’s U.S. operations, Enterprise Oil Services Inc., are headquartered in Houston.

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