Unocal Corp. announced plans to pick up the remaining 35% of Pure Resources Inc. which it does not already own, offering 0.6527 shares of Unocal common stock for each outstanding share of Pure’s common stock. The transaction is valued at about $400 million based on Unocal’s current share price.

Unocal, based in El Segundo, CA, would issue approximately 12 million shares to complete the transaction, which is designed to be a tax-free exchange. Subsidiary Union Oil Co. of California will make the offer to the Pure stockholders. Pure Resources was formed in May 2000 through the combination of Titan Exploration, Inc. and Unocal’s Permian Basin business unit (see Daily GPI, Dec. 15, 1999).

Union Oil currently owns approximately 65% of Pure’s common stock. Based on the $34.09 closing price of Unocal’s shares on Aug. 20, 2002, the offer represents a value of approximately $22.25 per share of Pure common stock and a 27% premium to the closing price of Pure common stock on that date, Unocal said.

Unocal expects to file offering materials with the Securities and Exchange Commission and to commence its exchange offer on or about Sept. 5. The offer will be subject to the condition that Unocal holds at least 90% of the outstanding shares of Pure common stock at the completion of the exchange offer, and other customary conditions.

Pure is an independent exploration and production company that develops and produces oil and natural gas in the Permian Basin, the San Juan Basin, the Gulf Coast and the Gulf of Mexico. The company also owns an undivided interest under approximately 6 million gross fee mineral acres throughout the Gulf Coast region.

At year-end 2001, Pure had 1,469 Bcfe of proved reserves, an interest in more than 6,000 wells, and an extensive inventory of exploration and development drilling projects.

For the quarter ended June 30, 2002, Pure produced approximately 22.5 Bcf, or 247.4 MMcf/d, as compared to approximately 20.8 Bcf, or 228.7 MMcf/d, for the same quarter in 2001, an increase of 8%. Oil and liquids production for the second quarter of 2002 totaled approximately 2.0 million barrels, or 22,033 b/d, an increase of 5% over the second quarter 2001.

Pure reported net income for the second quarter of $0.17 per diluted share, or $8.7 million, on revenues of $111.2 million, as compared to net income of $0.50 per share, or $25.6 million, on revenues of $132.3 million, for the same quarter in 2001. The decrease in net income is primarily due to lower commodity prices and higher exploration and abandonment expense. Pure’s second quarter 2002 average sales price (all price comparisons exclude the effects of hedging) for natural gas decreased 36% to $2.62/Mcf, as compared to $4.12 in the second quarter of 2001.

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