Acquisitions

An economic reality of the energy sector’s ongoing woes is that companies with cash and creditworthiness will be buying the assets of troubled companies who have been forced to sell to restore their tattered balance sheets. San Diego-based Sempra Energy’s CEO said his company will be among the buyers.

Questar Corp. plans to continue investing heavily in exploration and production (E&P) and reserve acquisitions in the Rocky Mountains and Midcontinent regions over the next few years to maintain its “good returns” on capital in its nonregulated businesses, and to lift the returns on its lagging regulated businesses. It also intends to sell off non-core energy assets to lighten its debt load, said the company’s new CEO Keith O. Rattie.

Stone Energy Corp. has announced that the acquisition of interests in eight producing oil and gas properties and related assets located in the Gulf of Mexico was completed on Dec. 31, 2001. The final aggregate purchase price, as previously announced, was $299.7 million and was financed with net proceeds from Stone’s recently completed offering of $200 million of 8.25% senior subordinated notes due 2011, and borrowings under its bank credit facility.

Stone Energy Corp. announced Wednesday that the acquisition of interests in eight producing oil and gas properties and related assets located in the Gulf of Mexico was completed on Dec. 31, 2001. The final aggregate purchase price, as previously announced, was $299.7 million and was financed with net proceeds from Stone’s recently completed offering of $200 million of 8.25% senior subordinated notes due 2011, and borrowings under its bank credit facility.

Raymond James & Associates expects another wave of mergers and acquisitions in the wake of the Enron catastrophe, as marketing and trading companies come to the realization that hard physical assets are much more desirable than heavily leveraging a balance sheet to a trading desk.

In a move usually reserved for the late stages of acquisitions — and unheard of less than a month after an initial agreement — Dynegy Corp. is in advanced discussions with Enron Corp. to renegotiate its merger offer of Nov. 9 to acquire the Houston-based rival. According to sources, Dynegy wants to reduce the all-stock transaction price by more than 40%, which would put its share price at about $6. Enron closed at $4.11 on Tuesday, 10 cents above its Monday close.

El Paso Energy Partners LP completed its previously announced acquisitions of the Chaco processing facility and Deepwater Holdings LLC from El Paso Corp. Chaco is a cryogenic natural gas processing facility located in northern New Mexico’s San Juan Basin and is connected to El Paso Field Services’ extensive natural gas gathering system. It is the third-largest natural gas processing plant in the United States with processing capacity of 700,000 Dth/d and natural gas liquids (NGL) production capacity of 50,000 b/d. EPN retains an existing lease with El Paso Field Services. In conjunction with the Chaco acquisition, EPN entered into a 20-year, fixed-rate tolling agreement to process natural gas for El Paso Field Services. The Chaco transactions are valued at $198.5 million. Deepwater Holdings owns the High Island Offshore System, which serves the Outer Continental Shelf region of the western Gulf of Mexico and the East Breaks Gathering System, which serves the deepwater trend of the western Gulf of Mexico region. Prior to the acquisition, EPN operated and held a 50% interest in Deepwater Holdings. EPN acquired the remaining 50% interest from a subsidiary of El Paso Corp. and retired project debt for a total transaction value of $85 million.

The Oil & Gas Asset Clearinghouse, the Houston-based marketing and consulting firm for property acquisitions and divestitures, will hold its 14th hybrid live floor/Internet auction on Wednesday. More than 1,100 oil and gas properties will be combined into 123 lots. The hybrid auction enables Internet bidders to compete real-time against the live auction floor.

Lehman Brothers Analyst Thomas Driscoll said an “exhaustive analysis” of mergers and acquisitions among 47 large producers, who account for about 70% of domestic production, led him to conclude that production rose 1.5-1.6% over the past six months. A continuation of the first-half trends will lead to 3-3.5% year-to-year production growth by the end of the fourth quarter, Driscoll said. However, the significant decline in prices probably will have an impact on drilling in the second half of the year.