Vintage Petroleum shareholders Thursday voted in favor of Occidental Petroleum’s $4.4 billion purchase offer, including $550 million in debt assumption and $3.87 billion in OXY shares and cash. The positive vote paves the way for the acquisition to be completed at the end of the month.
Under the terms of the merger, Vintage will be merged into a subsidiary of Occidental and Vintage stockholders will gain the right to receive 0.42 shares of Occidental common stock plus $20 in cash for each share of Vintage common stock they hold.
The deal will give Oxy more than 3 billion boe of total proved reserves, or about 20% more than at year-end 2004, with Vintage contributing 437 million boe in proved reserves and 421 million boe of probable and possible reserves.
In 3Q2005, Vintage’s total production averaged 75,055 boe/d with 108 MMcf/d of gas production and 57,000 bbl/d of oil production. At the end of 2004, Oxy’s total proved reserves were 2.53 billion boe. The addition of Vintage’s proved reserves is expected to extend its reserve life at current production levels from 12.2 years to 12.7 years.
Vintage’s primary oil and gas assets are in Argentina and Bolivia (67% of 2004 total proved reserves), and about 32% of its assets are in the United States, with 16% in California. Under the agreement, Oxy said it will sell Vintage assets in East Texas, along the Gulf Coast and in the Midcontinent region. The U.S. assets targeted for sale contributed 19,000 boe/d in the second quarter of 2005.
Oxy intends to incorporate Vintage’s California assets into its nearby operations in the southern San Joaquin Valley and in the Sacramento Valley. It also plans to integrate Vintage’s Latin American assets into its existing position in Latin America, where it is one of the largest producers in Colombia and Ecuador.
Oxy expects to continue growing both reserves and production from the Vintage assets it retains through a capital program with estimated spending in the range of $150-200 million annually. With the two companies’ synergies, corporate expenses are expected to be reduced by $40-60 million per year, and exploration capital expense will drop about $100 million per year.
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