The New Anadarko Will Have Broader Growth Portfolio
And More Financial Strength
HOUSTON and FORT WORTH, Texas, April 3 /PRNewswire/ -- Anadarko Petroleum
Corporation (NYSE: APC) and Union Pacific Resources Group Inc. (NYSE: UPR)
today announced a merger that will create one of the largest independent
exploration and production companies in the world in terms of 1999 reserves,
production and drilling activity. The combined company will be called
Anadarko Petroleum Corporation and will be headquartered in Houston.
Under the agreement, which was unanimously approved by each company's
board of directors, UPR shareholders will receive 0.4550 Anadarko common
shares for each UPR common share they own. As a result, Anadarko shareholders
will hold approximately 53 percent of the combined company and UPR
shareholders approximately 47 percent. Based on the Anadarko closing price of
38.6875 on March 31, 2000, the combined company will have about 243 million
shares outstanding and a market capitalization over $9 billion. Based on this
closing price, the transaction has an implied value to UPR shareholders of
$17.60 per share, representing a 21% premium to UPR's closing price on Friday,
March 31, 2000. The stock-for-stock deal is subject to approval by
shareholders of both UPR and Anadarko and customary regulatory approval.
Following the merger, UPR will be a wholly owned subsidiary of Anadarko.
Anadarko expects the merger to be treated as a tax-free reorganization and
accounted for as a purchase. The merger agreement includes a provision under
which UPR and Anadarko granted each other the right to purchase 19.9% of each
other's outstanding shares. Anadarko believes the proposed merger will be
immediately accretive to both cash flow and earnings.
Robert J. Allison, Jr. will continue to be Chairman and Chief Executive
Officer of Anadarko. George Lindahl III, Chairman, President and Chief
Executive Officer of UPR, will become Vice Chairman of Anadarko after the
merger. Five members of UPR's Board of Directors will join the Anadarko
board, subject to Anadarko shareholder approval of the larger board.
Comments by Bob Allison: "This merger is an excellent fit for both
companies. We blend Anadarko's strengths in exploration with what UPR does
best -- profitable exploitation with industry-leading drilling and completion
technology. The new Anadarko will have the financial strength to aggressively
pursue a broader portfolio of projects. We can accelerate activity in the
most prospective areas offering the best returns for shareholders. We do
expect some modest cost reductions with the merger, but that's not what drives
this deal. It's about complementary skills and assets that can give us
dramatic growth and profitability. We expect to grow faster and beyond the
levels either company could achieve individually. Given the current outlook
for energy markets, now is the time to step up the pace of drilling for new
energy reserves -- particularly North American natural gas. More energy for
America is good news for our shareholders and it's good news for consumers as
well."
Comments by George Lindahl: "The merger provides significant benefits to
UPR shareholders. It recognizes the value of our core producing assets and
our portfolio of projects throughout the Americas. We bring to the new
Anadarko skills and experience that are complementary to their exploration
strength. UPR is an industry leader in drilling and completion technology.
That expertise can now be applied to a larger asset base with stronger capital
resources than ever before. This deal offers UPR's shareholders an exciting
future -- marked by significant increases in production, earnings and cash
flow -- starting this year. We will have more exposure to high-potential
exploration and increased opportunity for growth in the near-term. The
combined companies share a commitment to organic growth through exploration
and exploitation strategies that will continue to build value for shareholders
in the future."
Comments by Anadarko President and Chief Operating Officer John Seitz:
"Anadarko has spent years developing what I believe to be the best team of
energy explorers in the business and providing them the best available
technology. Our team has delivered consistent growth in production and
reserves and found a dozen giant oil and gas fields over the past 20 years.
In recent years, our team has identified more outstanding drilling
opportunities than we could fund with available cash flows. This merger gives
us more capital and talented people, so we can immediately go to work finding
new reserves of oil and gas. With the best people in the business, we expect
to generate even more impressive growth and returns for our shareholders!"
Anadarko said the company's Growth Portfolio would be well balanced around
three types of worldwide activity -- Exploration, Development and
Exploitation. The new Company would also have more Financial Strength than
was previously offered by either company alone.
Growth Portfolio
Proved Reserves -- The combined companies' proved reserves would be
equally split between crude oil and natural gas and equivalent to 1.94 billion
barrels of oil (BOE) or about 11.65 Trillion cubic feet of gas (Tcfe). About
80 percent of total reserves are in North America and 20 percent in
international areas. At current expected production rates, the reserve life
index of the combined companies would be 10.8 years.
Exploration -- The merger combines exploration projects now underway in
both companies in some of the highest potential areas of the world today. To
date, Anadarko has identified over 100 exploration prospects from the combined
companies' portfolio with over 11 billion barrels of net un-risked reserve
potential. In the U.S., significant reserve potential exists in a number of
exploration plays in Texas, the Gulf of Mexico (conventional, sub-salt and
deepwater plays), Alaska and the Rocky Mountain areas. In foreign
exploration, the new portfolio will include projects in Canada, the Sahara
Desert of Tunisia, the North Atlantic Margin, and Latin America. The new
Anadarko will now have the financial strength to aggressively pursue
additional exploration ventures worldwide.
Development -- Near-term cash flow will benefit from a broad portfolio of
development projects. Construction and development drilling are already
underway to commercialize recently discovered oil and gas fields in Alaska
(Alpine & Moquawkie fields), Algeria (the HBN and HBNS fields) and the Gulf of
Mexico (Tanzanite & Hickory fields). In addition, large development drilling
projects are planned to increase oil and gas production in Texas
(the Carthage, Ozona and Giddings Fields); in Wyoming (the Wamsutter Field);
and in Canada (the Hatton and Jedney fields). In 2001, these development
projects should generate over 10 million BOE of new production with even
higher levels in 2002.
Exploitation -- Significant growth opportunity has been identified in
existing fields, where in-fill and step-out drilling, state-of-the-art
technologies in reservoir engineering, drilling, completion and production can
be used to extend field limits, increase production and recover more reserves.
Many projects represent a blend of exploration and development such as the
Bossier Play in East Texas. To date, Anadarko has identified over 50 such
projects in the inventory of the combined company. Net potential reserves from
these projects are one billion BOE (un-risked).
The new company will play a major role in the growing North American
natural gas market (I). Based on 1999 data for all energy companies
(independents and majors), Anadarko will now rank as the 6th largest natural
gas producer in North America, and the 5th largest holder of natural gas
reserves.
The new Anadarko will hold significant acreage positions and drilling
opportunity in most of the high-potential, gas-rich basins of North America,
including Western Canada, and the U.S. basins of the Rocky Mountains, the
Mid-continent, Texas, and the Gulf of Mexico. These basins today account for
90% of U.S. gas supply.
Financial Strength
Earnings and Cash Flow -- Anadarko believes the proposed merger will be
immediately accretive to both cash flow and earnings. Anadarko estimates that
if the companies were combined for the year 2000, cash flow would have been
about $1.8 billion (or about $7.50 per share). For the year 2001, given the
current outlook for commodity prices, cash flow is expected to increase
further, to more than $2 billion (or about $9.00 per share).
Balance Sheet -- The new Anadarko will have a stronger balance sheet than
either company had individually. This increased financial strength should
give the new Anadarko continued access to capital markets to continue its
drilling and development projects around the world. Anadarko will utilize
full-cost accounting for the combined company. On a pro-forma consolidated
basis as of year-end 1999, the combined companies would have had a total
capitalization of $10 billion, comprised of $5.9 billion of equity and
$4.1 billion of debt. The debt to total capitalization ratio would be 41%.
The average maturity life of the debt would be 21 years, and the average
annual interest rate would be 7.11%.
Credit Suisse First Boston and Wachtell, Lipton, Rosen & Katz served as
advisors to Anadarko for this transaction. Advisors to UPR were the firms of
Simmons and Company, Goldman Sachs, and Morgan, Lewis and Bockius.
Summary Transaction Terms
Exchange Ratio 0.4550 APC shares for each UPR Share
Accounting Structure Purchase Accounting/Full Cost
Tax Structure Tax Free Merger
Capitalization Debt-Cap Est. @ 41%
Company Name Anadarko Petroleum Corporation
Headquarters Houston, Texas
Board of Directors 8 APC, 5 UPR (proposed)
Target Closing Date July 2000
Forward-Looking Statements
Except for historical information, all other information in this news
release consists of forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to risks and uncertainties, which could cause actual
results to differ materially from those projected, anticipated or implied.
The most significant of these risks and uncertainties are described in
Anadarko's and UPR's SEC filings and reports and exhibits to those reports,
and include (but are not limited to), the costs and difficulties related to
the integration of acquired businesses, commodity pricing and demand,
exploration and operating risks, development risks, and the costs and other
effects of governmental regulation and legal and administrative proceedings.
Anadarko and UPR undertake no obligation to publicly update or revise any
forward-looking statements.
All stockholders should read the proxy statement/prospectus concerning the
merger that will be filed with the SEC and mailed to stockholders. The proxy
statement/prospectus will contain important information that stockholders
should consider before making any decision regarding the merger. Stockholders
will be able to obtain the proxy statement/prospectus, as well as other
filings containing information about Anadarko Petroleum Corporation and Union
Pacific Resources Group Inc., without charge, at the SEC's Internet site
(http://www.sec.gov). Copies of the proxy statement/prospectus and the SEC
filings that will be incorporated by reference in the proxy
statement/prospectus can also be obtained, without charge, from the Corporate
Secretary of the appropriate company.
Certain Information Concerning Participants
Anadarko Petroleum Corporation ("Anadarko") and certain other persons
named below may be deemed to be participants in the solicitation of proxies of
Anadarko's stockholders to approve the issuance of Anadarko's common stock.
The participants in this solicitation may include the directors of
Anadarko: Conrad P. Albert, Robert J. Allison, Jr., John N. Seitz, Larry
Barcus, James L. Bryan, Ronald Brown, John R. Butler, Jr., and John R. Gordon;
the following executive officers of Anadarko: Robert J. Allison, Jr.,
(Chairman and Chief Executive Officer), John N. Seitz (President and Chief
Operating Officer), Michael E. Rose (Senior Vice President, Finance), Charles
G. Manley (Senior Vice President, Administration) and William D. Sullivan
(Vice President, International Operations); and the following other members of
management and employees of Anadarko: A. Paul Taylor, Jr. (Investor
Relations) and James A. Canino (Public Affairs). As of the date of this
communication, none of the foregoing participants individually beneficially
owns in excess of 1.5% of Anadarko's common stock, or in the aggregate in
excess of 4% of Anadarko's common stock.
Except as disclosed above, to the knowledge of Anadarko, none of the
directors or executive officers of Anadarko or the employees or other
representatives of Anadarko named above, has any interest, direct or indirect,
by security holdings or otherwise in Anadarko.
NOTES: I. A 1999 study by the National Petroleum Council predicted US
natural gas consumption would grow from 22 Tcf in 1998 to 26
Tcf in 2005 and reach 31 Tcf in 2015.
SOURCE Anadarko Petroleum Corporation
 back to top
Related links:
http://www.anadarko.com
Photo Notes:http://www.newscom.com/cgi-bin/prnh/19990430/ANADARKOLOGO
PR Newswire Photo Desk, 888-776-6555 or 201-369-3467
Company News On-Call:
http://www.prnewswire.com/comp/038950.html or fax,
800-758-5804, ext. 038950
CONTACT:
A. Paul Taylor, Analysts and Investors,
281-874-3471, or Tony Canino, 281-873-3855, both of Anadarko; or
Patrick Mooney, 817-321-7169, or Dan Sullivan, 817-307-6286, or
David Larson, 817-321-7294, all of UPR
|
