Industry merger and acquisition activity yesterday was astartling confirmation of two major trends: the convergence of gasand electricity operations, and consolidation. Two more of thenation’s largest diversified gas pipeline companies were snatchedup by two major energy distributors. Sempra Energy (SRE) bought KNEnergy (KNE) in a stock-and-cash transaction valued in theaggregate at $6 billion, a 24% premium to KNE’s recent stock price,and Dominion Resources bought Consolidated Natural Gas Co. (CNG)for about $6.3 billion in stock, a 25% premium.
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Vastar Resources replaced 215% of its 1998 production with newreserves, its highest-ever reserve replacement rate. Provedreserves additions totaled 1,052 Bcfe, or 1,023 Bcfe inclusive ofdivestitures. Year-end total reserves were a record 3,700 Bcfe, up17% over the year-end 1997 base. Average reserve replacement costs,including acquisitions, were $1.11/Mcfe.
Evergreen Resources, Inc. announced Thursday the acquisition of41,000 gross Raton Basin acres from Infinity Inc. affiliate, CISOil and Gas, for $8.5 million. Evergreen estimates this additionwill increase its coal-bed methane proved net gas reserves by 22.5Bcf. The company now holds working majority interest in 200,000acres in the basin. The effective date of the transaction was Dec.31, 1998.
International power generation developer AES Corp. continued anaggressive acquisition strategy yesterday with the purchase of all13.6 million shares of Peoria, IL-based CILCORP, parent of CentralIllinois Light Co., for $65 per share, a 22% premium. The value ofthe transaction is about $885 million.
The depressed crude oil market continued to fuel an acquisitionfrenzy north of the border yesterday with Canadian producerRenaissance Energy mounting a friendly takeover of fellow CanadianPinnacle Resources Ltd. Renaissance CEO Clayton Woitas said theC$1.06 billion deal is designed to improve “operatingefficiencies,” build a stronger presence at a “fair price andcreate “long-term value” for shareholders.
Williams complemented its retail energy marketing group with theacquisition of Tulsa-based Excel Energy Technologies, a provider ofenergy management systems and services for retail and commercialbuildings. “Excel’s products and services, combined with Williams’energy supply management products, will give our national energycustomers the benefit of proven technologies and systems to helpthem make educated decisions about energy management,” said JerryGollnick, Williams’ senior vice president of energy marketing andtrading.
Chesapeake Energy completed its acquisition of Hugoton Energyafter receiving shareholder approvals. Proforma for the Hugotontransaction and other announced pending acquisitions, Chesapeake’sproved oil and gas reserves will be about 1,050 Bcfe, of which 80%are natural gas. In addition, about 70% of Chesapeake’s reserveswill be proved developed producing, and 75% will consist oflong-lived Midcontinent reserves. Estimated proforma dailyproduction will exceed 410 MMcfe. Trading of Hugoton stock ceasedMarch 10, and each outstanding common share of Hugoton stock wasconverted into the right to receive 1.3 shares of Chesapeake commonstock. Holders of fractional shares will receive $8.78/Hugotonshare. About 26 million additional shares of Chesapeake will beissued to Hugoton shareholders. Including $120 million of Hugotondebt assumed by Chesapeake, the transaction is worth about $300million.