Anadarko Petroleum Corp., Houston, (NYSE: APC) plans to acquire Kerr-McGee Corp., Oklahoma City, (NYSE: KMG) and Western Gas Resources Inc., Denver, (NYSE: WGR) in separate deals for a total of approximately $21.1 billion, plus $2.2 billion in assumed debt. Anadarko will pay $16.4 billion ($70.50 per share) for Kerr-McGee, plus $1.6 billion in assumed debt and other liabilities. The company will also pay $4.7 billion ($61 per share) for Western Gas Resources, plus $600 million in assumed debt and other liabilities. Both deals are all-cash transactions that Anadarko will finance with a $24-billion committed acquisition facility provided by UBS, Credit Suisse and Citigroup. Kerr-McGee's core assets are in the deepwater Gulf of Mexico, and onshore in Colorado and Utah. The company also has exploration activities in Alaska, Australia and China. Proved reserves (excluding pending Gulf of Mexico shelf divestitures) total 898 million BOE, 62% gas, 30% proven undeveloped. Production this year is expected to be about 92 million BOE (60% gas). Anadarko plans to recover more than 3.1 billion BOE on the Kerr-McGee properties, at a full-cycle cost of approximately $39.2 billion ($12.40 per bbl.), including the acquisition cost. Western Gas' assets are in the Powder River Basin in Montana and Wyoming. Proved reserves total 153 million BOE (57% proved undeveloped). Production this year is expected to total about 12.5 million bbl. (mostly gas). Anadarko plans to recover approximately 705 million BOE on the Western Gas properties, at a full-cycle cost of approximately $6.7 billion, or less than $10 per bbl. Approximately $1.6 billion of the total Western Gas acquisition price will be allocated to midstream gathering, processing and transportation assets. The remaining value is assigned to two gas resource plays in Wyoming: coalbed-methane (CBM) in the Powder River Basin within the Big George coals, and tight gas in the Pinedale Field. Western Gas' CBM properties within the Powder River Basin are estimated to hold about 9 trillion cu. ft. of gas and are adjacent to Anadarko's assets in this developing play. Western Gas also has a 10% average working interest in their Pinedale/Jonah joint ventures, which encompass world-class fields totaling more than 40 trillion cu. ft. of gas. Anadarko chairman, president and chief executive Jim Hackett says, "We are creating a combined company with industry-leading positions in the deepwater Gulf of Mexico and the Rockies, two of the fastest-growing oil and natural gas producing regions in North America. The core assets being acquired strongly complement Anadarko's existing properties, providing the scale and focus needed to deliver more robust, predictable and efficient growth." Hackett adds, "Two years ago, we unveiled a strategy that included a solid North American foundation of onshore resource plays, a growing deepwater Gulf of Mexico program and an expanding international portfolio. Kerr-McGee and Western Gas Resources strengthen Anadarko's position on all three counts, with captured growth projects that are consistent with our core skill sets. The transactions enable us to create a more focused operating strategy with a larger and lower-risk asset base." In a conference call, Hackett said that the company aims to pay down the debt of these deals in 18 to 24 months by selling assets and issuing equity. "We don't know how Anadarko will rank after the close because we don't know how many asset sales we'll have, but we'll be near the top even after the sales, along with Devon Energy and EnCana Corp." Year-end 2005 proved reserves for Anadarko totaled 3.5 billion BOE; EnCana, 18.5 trillion cu. ft. equivalent (Tcfe); Devon, 2.1 billion BOE; Chesapeake Energy Corp., 7.8 Tcfe; and Chevron, 11.9 billion BOE. Credit Suisse and UBS are financial advisors for Anadarko; Goldman Sachs provided the fairness opinion. JP Morgan and Lehman Brothers are financial advisors to Kerr-McGee. Morgan Stanley & Co. Inc. and Petrie Parkman & Co. Inc. are financial advisors to Western Gas. John Herrlin, an E&P analyst with Merrill Lynch analyst, says, "By acquiring both Kerr-McGee and Western Gas, Anadarko will significantly enhance its Rockies gas position while adding upside exploration in the deepwater Gulf of Mexico along with other international exploration plays in Brazil and China. In addition, with Western Gas, it also gets a first-class midstream operation that generates strong earnings before interest and taxes and cash flow. Our primary concern is that Anadarko may need to book a lot of goodwill or put a fair amount of purchase costs in unamortized properties in order to avoid dilution. "Given the call on gas, and that Anadarko indicated it would finance the transaction through a one-year, $24-billion revolver, with pending asset sales and cash flow from operations, and an equity offering in order to pay it down, we think there remains some significant financial and operating execution risks." Carin Dehne Kiley, an analyst with Calyon Securities USA, says the acquisitions are about 15% dilutive to Anadarko's 2007 estimated earnings per share and about 7% dilutive to its net asset value per share. Any potential asset sales requiring less equity would likely improve these metrics, Kiley says. "Importantly, Anadarko has identified 2.8 billion BOE of probable and possible reserves on the properties, which equates to 80% of its pro forma proven reserves," Kiley adds. "Consequently, given the significant upside associated with the acquired properties and the likelihood of asset sales reducing the amount of equity required, we are maintaining our Buy rating on Anadarko stock, although we are lowering our price target to $60 from $62 per share." Fitch placed Anadarko's credit ratings on Rating Watch Negative. Anadarko announced shortly after the deal news that it will sell its Anadarko Canada Corp. subsidiary as part of its portfolio-refocusing. Jim Hackett said, "Properties like ours are in high demand in Canada right now, attracting valuations significantly above those reflected in our stock price. This arbitrage opportunity motivates us to essentially trade out of the Canadian operations and into the Kerr-McGee and Western properties." Anadarko Canada currently produces approximately 340 million cu. ft. equivalent per day, 85% gas. Year-end 2005 proved reserves in Canada totaled nearly 1.6 Tcfe, 85% gas, 76% proved developed. Tristone Capital Inc. is handling the sale process. "Two years ago, we demonstrated our ability to execute on a major portfolio-refocusing effort, expeditiously and with higher-than-anticipated results. We intend to do so again, and therefore are not waiting for the acquisitions to close before launching the effort, since we expect to divest certain assets that are part of the current Anadarko portfolio." -Stephen Payne and Bertie Taylor Additional news • Plano, Texas-based E&P company Ascent Energy Inc. has filed for an IPO for proceeds of up to $200 million on the Nasdaq. The number of shares and the price range have not been determined yet. Lehman Brothers and Jefferies & Co. are joint book-runners. Ascent is gas-focused and has properties in Louisiana, Oklahoma and Texas. It is also exploring the Appalachia. The company controls proved reserves of about 42 billion cu. ft. of gas and 10 million bbl. of oil, Hoover's reports. • Houston-based Stallion Oilfield Services Inc. has filed for an IPO on the Nasdaq for proceeds of $287.5 million. The number of shares and price range have not been determined yet. Proceeds will pay debt and be used for general corporate purposes, including potential acquisitions. Lead underwriters include Lehman Brothers, Credit Suisse First Boston and UBS Investment Bank. Stallion provides well-site support services and construction and logistics services to E&P companies and drilling contractors. • Penn Virginia Corp., Radnor, Pa., (NYSE: PVA) reports that its subsidiary, Penn Virginia GP Holdings LP, has filed for an IPO of 6 million common units on the New York Stock Exchange. The price range has not been determined yet. The proposed ticker is PVG. PVG was recently formed by Penn Virginia to own the general partner interest, all of the incentive distribution rights, 7.5 million common units and 7.6 million subordinated units in Penn Virginia Resource Partners LP (NYSE: PVR). Proceeds will be used by PVG to purchase newly issued Class B common units from PVR, and PVR expects to use the proceeds to pay debt. Lehman Brothers and UBS Investment Bank are joint book-running managers for the offering. • Houston-based Universal Compression Holdings Inc. (NYSE: UCO) has filed for an IPO of 5.5 million partnership units for Universal Compression Partners LP on the Nasdaq as UCLP. The share price has not been determined yet. Lehman Brothers Inc. and Merrill Lynch are lead underwriters. Assuming an offering price of $20 per unit, UCH expects to receive net proceeds of approximately $99.4 million. Proceeds will be used to pay debt. UCH provides natural gas contract compression services throughout the U.S. • Addison, Texas-based Dresser Inc. has withdrawn its filing for an IPO on the New York Stock Exchange for proceeds of $575 million due to its need to restate 2004 annual and quarterly financial statements and first-, second- and third-quarter 2005 financial statements. The company is evaluating the need to restate periods prior to 2004. • Cork Exploration Inc., Calgary, (Toronto: CRK) has closed its C$35-million IPO of 8.75 million common shares at C$4 each for proceeds of about C$33 million. Proceeds will be used to pay debt and fund the company's 2006 capital program. Tristone Capital Inc. was lead underwriter. FirstEnergy Capital Corp., GMP Securities LP and CIBC World Markets were also underwriters. Cork focuses on E&P activities in Alberta. Since inception in February 2005, Cork has grown its production through farm-in arrangements, government land sales and drilling to 702 BOE per day with an additional estimated 1,000 per day awaiting completion and tie-in. As of April, Cork's estimated proved-plus-probable reserves totaled 5.2 million BOE at an average finding cost of approximately C$11.50 per BOE. Philip Collins, president and chief executive, says, "With a strong land position and more than 90% exploratory well success on 15 gross wells drilled to-date in 2006, this offering provides Cork with capital to assist in meeting our drilling objectives. We anticipate drilling an additional 30 gross wells by the end of the year." • Russian oil firm Rosneft raised $10.4 billion in an IPO of 1.38 billion shares and global depositary receipts at $7.55 each in July, near the top of the expected price range, Reuters reports. BP Plc (NYSE: BP) bought $1 billion worth of shares, or 10% of the offering, and China National Petroleum Corp. and Petronas have reportedly also placed large bids for shares, according to Reuters. Proceeds will be used to pay off a loan of $7.5 billion that was taken in September 2005 to buy a 10.74% stake in Gazprom and to pay debt, according to Reuters. ABN Amro, Dresdner Kleinwort, JPMorgan and Morgan Stanley managed the IPO. The shares are being listed on Russia's RTS exchange and the Micex exchange as ROSN, Reuters reports. Yukos is seeking an interim injunction to restrain the London Stock Exchange from listing Rosneft's shares. • Another large investor is pressing The Houston Exploration Co., Houston, (NYSE: THX) to sell. Wexford Capital LLC, Greenwich, Conn., has sent a letter to the THX board asking it to have a "fair, open and thorough auction process to sell the company and maximize shareholder value." Wexford is an investment advisor that manages a series of investment funds. It has more than 400,000 shares of THX stock, or a 1.5% interest in the company. THX has retained Lehman Brothers to advise it on strategy. • Carin Dehne Kiley has joined Calyon Securities USA in New York as the lead E&P analyst, replacing analyst Brad Beago, who left the firm's Houston office a few months ago to join a hedge fund. She has initiated coverage of five E&P names, with Buy ratings on Anadarko Petroleum (NYSE: APC) and Apache Corp. (NYSE: APA). (The rating is still Buy post-Anadarko's acquisition news.) She has an Add recommendation on Chesapeake Energy (NYSE: CHK), Cimarex Energy (NYSE: XEC) and Newfield Exploration (NYSE: NFX). Kiley previously was an analyst on the award-winning team at Banc of America Securities. • EnCap Investments LP, Houston and Dallas, reports that Murphy Markham has joined the Dallas office as managing director. Markham was senior vice president and head of J.P. Morgan Chase's oil and gas finance group in Dallas. Also, Brent Bechtol, Jason DeLorenzo, Sean Smith and Doug Swanson have been named managing directors and Mark Welsh has been named assistant vice president. Welsh worked in the private-equity business with Blackstone and the Adams Group. Separately, the firm reports that its Fund V is 96% committed and 57% funded. Fund VI was activated earlier this month. If gas prices stay firm into the winter heating season, the firm expects several Fund IV and Fund V investments (E&P firms) will be monetized in late 2006/early 2007. • Boutique investment bank Dahlman Rose & Co. LLC, New York, has formed a leveraged finance group to compliment the firm's equity business. The group, headed by managing director Neal Thomas, will be involved in all aspects of below-investment-grade fixed income and private placements. Previously, Thomas was a managing director at Guggenheim Capital Markets. The group will initially focus on the energy space and expand into all industries and sectors, providing a range of research, sales, trading and capital-markets services. The group will look at opportunities in the high-yield, mezzanine, private-equity, financial sponsor and distressed universe. Management includes Mario Monello, senior capital markets advisor; Paul Lopez, managing director, capital markets; David Kranich, senior vice president, trading; Susan DeRoberts, vice president, sales; and Joseph McGrath, vice president, research. Monello was a managing partner at Lehman Brothers; Lopez was a high-yield research analyst at CIBC World Markets; Kranich was with BB&T Capital Markets, high yield and distressed trading; DeRoberts was a trader at Harbert Management and McGrath was with Imperial Capital and Guggenheim Capital Markets. Jeffrey T. Silverman has been named managing director in the leveraged finance group. Previously, he was a vice president at DLJ and Credit Suisse First Boston. • Centennial Bank Holdings Inc., Denver, (Nasdaq: CBHI) reports that Charles Searle has joined its subsidiary, Guaranty Bank and Trust Co., as executive vice president of commercial and energy banking. He has more than 35 years of commercial and corporate banking experience in the Denver metropolitan area, including 27 years in the energy sector. Gail Nofsinger has been named a vice president and senior energy lender. She most recently was with GE Energy Financial Services in Denver. • Private-equity firm First Reserve Corp., Greenwich, Conn., has named Alan G. Schwartz managing director. Schwartz joins First Reserve from Simpson Thacher & Bartlett LLP's energy practice. • Denver-based Rivington Capital Advisors LLC has formed Rivington Financial Services LLC to provide accounting and consulting services to small and midcap energy companies. Dan R. Taylor has joined the company as president of RFS and he will be joined by Timothy L. McLemore, chief operating officer, Sally Pieper, vice president, and Jose Garduno, vice president. Taylor was with Medicine Bow Energy Corp. as vice president, accounting, until the firm was sold to El Paso (NYSE: EP) in August 2005. • Houston-based Growth Capital Partners LP has closed Southwest Mezzanine Investments II LP at more than $65 million. Jim Forrester, Jim Rebello and Drew Sudduth will manage the fund. Investors include Amegy Holding Delaware Inc., Cuna Mutual Life Insurance Co., Sumitomo Mitsui Banking Corp., family offices and high-net worth individuals. SM II intends to target $2- to $5 million subordinated debt investments in middle-market companies. The fund will consider companies with competitive advantages, enterprise values in excess of $10 million and a history of profitable operations. • Haddington Ventures LLC, Houston, has closed a new private-equity fund, Haddington Energy Partners III LP, with committed capital of $182 million to be used for investments in the North American midstream energy industry. Fund III is seeking equity investment opportunities developed by experienced management teams in the $20- to $50-million range with a total enterprise value of $100- to $200 million. The fund will also consider initial investments as low as $2- to $5 million, depending upon growth potential and follow-on investment opportunities. • E. Marc Cuenod Jr. has been named head of Wells Fargo Energy Group's Houston energy division, which lends capital to the middle-market energy sector, under Kyle Hranicky, senior vice president and group head for the energy group. Cuenod has been a senior relationship manager in the Wells Fargo Energy Group since 2004, managing a portfolio of more than $400 million in commitments. Prior to 2004, he was assistant treasurer of corporate finance for Ocean Energy Inc., assistant treasurer for Coastal Corp., senior vice president, gas origination, for El Paso Merchant Energy, and in banking for Mellon Bank and Continental Illinois National Bank And Trust Co. • Frank K. Stowers has been named president of the Midland-Odessa market for Citibank Texas, which provides commercial capital to middle market oil and gas producers. He was senior vice president, based in Midland, for Citibank Texas. • Harris Nesbitt and BMO Nesbitt Burns, the U.S. and Canadian investment-banking units of BMO Financial Group, Chicago, (NYSE; Toronto: BMO) will be combined under a single entity and have been renamed BMO Capital Markets. The new brand encompasses all the firms' banking capabilities, including debt and equity underwriting, corporate lending and other banking services. Harris Nesbitt will remain the brand name for the U.S. retail, commercial and private banking operations. • Geoff Davis has joined E&P asset-marketing advisory firm Richardson Barr & Co., Houston, as a vice president. He previously was with Tristone Capital Inc. and Petroleum Place Energy Advisors. • Tristone Capital Inc., Calgary, has named Chris Simon and Miles Redfield managing directors, A&D, in Houston. They were formerly vice presidents, A&D, for Tristone. • Tatneft, Almetyevsk, Russia, (NYSE: TNT, London: ATAD) plans to delist from the New York Stock Exchange and terminate registration of its shares with the SEC to concentrate trading outside of Russia on the London Stock Exchange, due to increased SEC-related costs. • Oil and gas drilling contractor GlobalSantaFe Corp. (NYSE: GSF) reports that its worldwide SCORE, or Summary of Current Offshore Rig Economics, for May was 118.5, up 71.2% from one year ago. It is now the highest in the 25-year SCORE's history. • CanArgo Energy Corp., St. Peter Port, British Isles, (Amex: CNR) reports that its subsidiary, Tethys Petroleum Investments Ltd., plans to list on London's AIM exchange to raise funds for its development and exploration activities in Kazakhstan. Closing is expected this fall. ODL Securities Ltd. is the principal broker for Tethys. Proceeds will be used to develop the Kyzyloi gas field and exploration and development in the Akkulka and Greater Akkulka areas, as well as potential new acquisitions in Kazakhstan and related areas. CanArgo is an independent E&P company with oil and gas operations in Georgia and Kazakhstan. M&A news • Devon Energy Corp., Oklahoma City, (NYSE: DVN) has closed the acquisition of the Barnett Shale E&P properties in North Texas of privately held Chief Holdings LLC for $2.2 billion in cash, including assumed liabilities. The properties have estimated proved reserves of 617 billion cu. ft. of gas equivalent and leasehold totaling 169,000 net acres, and produce approximately 55 million cu. ft. of gas equivalent per day. The combined companies will have production of 645 billion cu. ft. of gas equivalent per day from 2,500 wells. An additional 31 wells are awaiting completion and pipeline connection which will add 30 million cu. ft. of gas equivalent per day. Devon plans to drill approximately 800 wells on the acreage during the next five years and produce in excess of 2 trillion cu. ft. of gas equivalent. Chief's assets include an estimated 103 million BOE in the Barnett Shale. Devon is the largest producer in the Barnett Shale, producing approximately 600 million cu. ft. equivalent per day from about 2,200 wells. Devon will have 30 rigs operating over a lease position of 721,000 net acres and expects company-wide production approaching 300 million BOE in 2009. Devon's successful bid was made jointly with midstream Dallas-based Crosstex Energy Services (Nasdaq: XTEX), which has acquired Chief's midstream assets for $480 million. Petrie Parkman & Co. advised Chief on the deal. • Repsol YPF SA, Madrid, (NYSE: REP) has acquired a 28% interest in the Shenzi Field in the Gulf of Mexico from BP Plc, London, (NYSE: BP) for US$2.15 billion. The assets have estimated reserves of 350- to 400 million BOE in the Southern Flank, with additional possible reserves of 100 million bbl. The field is expected to raise Repsol's Gulf of Mexico production to more than 35,000 bbl. of oil per day. The field is operated by BHP Billiton with a 44% interest and the third partner is Hess Corp. (28%). Commercial production is expected to begin mid-year 2009 at a gross rate of 100,000 bbl. of oil per day. Repsol YPF has had activity in the Gulf of Mexico since 2003, and currently holds a stake in 85 exploration blocks in Green Canyon, Atwater Valley, Alaminos Canyon and Mississippi Canyon, and is operator of 45 of them. The Gulf of Mexico is one of the core business areas for the company outside of Latin America. BP used some of the funds to acquire equity in Russian producer Rosneft, Moscow, in its IPO. • Helix Energy Solutions Group Inc., Houston, (Nasdaq: HELX) has acquired Dallas-based Remington Oil and Gas Corp. for approximately $1.4 billion in cash and stock, consisting of $27 in cash and 0.436 share of Helix common stock per Remington share. Remington has operations onshore and offshore the Gulf Coast. Its 2005 year-end proved reserves were 18.4 million bbl. of oil and 168.7 billion cu. ft. of gas for a cumulative 278.9 billion cu. ft. of gas equivalent (64.2% gas). Helix is an energy services company with worldwide services that include marginal field development, alternative development plans, field-life extension and abandonment. Helix chairman and chief executive Owen Kratz says, "The acquisition of Remington is the next key step in the evolution of (Helix's) unique production-contracting-based business model. Access to both deepwater hydrocarbon prospects and the available means to exploit them, as an operator, should lead to the continuation of our differentiated long-term earnings growth." To fund the cash portion of the merger, Helix entered an $835-million, 1% senior secured term B facility. Simmons & Co. International and Banc of America Securities were financial advisors to Helix for the cash portion of the acquisition. • Apache Corp., Houston, (NYSE, Nasdaq: APA) has acquired and is in the process of acquiring London-based BP's (NYSE: BP) remaining producing properties on the outer continental shelf of the Gulf of Mexico for US$845 million cash. Apache plans to finance the transaction with cash, and will acquire 13 producing fields, nine of which are operational, including the Grand Isle/West Delta Field that Apache will operate and have a 75% ownership. The total estimated proved reserves on the assets are 19.5 million bbl. of liquids and 148 billion cu. ft. of gas. Apache has also identified 49 drilling locations on the properties and an additional 4 million bbl. of liquids and 24 billion cu. ft. of gas in probable and possible reserves. The deal originally stated Apache would acquire 19 fields for $1.3 billion. A company spokesman said that preferential owners had acquired five of the fields for $379 million, representing 25% of the reserves. The acquired assets are expected to produce an average of 3,650 bbl. of liquids and 85 million cu. ft. of gas per day. Production and cash flow are expected to rise in 2007 as fields damaged in the 2005 hurricane season are brought back online. Apache will operate 97% of the assets. Raymond Plank, Apache founder and chairman, says, "This transaction is a good fit for the long-term strategies of both BP and Apache. Though we are much smaller than BP, we share its desire to focus capital and talented professionals on assets that will provide the maximum return for shareholders." After the transaction, Apache will have shelf assets that comprise 20% of its company-wide production. Goldman, Sachs & Co. was financial advisor to Apache for the transaction. • Coldren Resources LP, a subsidiary of privately held Coldren Oil & Gas Co., New Orleans, has closed the acquisition of Gulf of Mexico shelf assets from Noble Energy Inc., Houston, (NYSE: NBL) for $625 million. The properties are approximately 725,000 gross (423,000 net) leasehold acres involving 54 total fields, which contain 520 wellbores (132 operated) and 158 platforms (27 operated). The sale includes essentially all of Noble's assets on the Gulf shelf, with Noble retaining its interest in the Main Pass area.