Cabot Oil & Gas Corp. (NYSE: COG) is buying Denver-based Cody Co. , the parent of Cody Energy LLC , for $230 million in cash and stock. Cody Energy's reserves are in Texas and Louisiana and total 166 billion cu. ft. of proved gas equivalent, 58% gas. Production is 50 million cu. ft. equivalent daily, 84% gas. Petrie Parkman & Co. advised Cody in the transaction. The acquisition will double Houston-based Cabot's proved Gulf Coast reserves to approximately 300 billion cu. ft. of gas equivalent, and will bring its total proved reserves to 1.19 trillion cu. ft. equivalent. Daily production will grow 25% to 250 million cu. ft. equivalent, about half from the Gulf Coast. "We have consistently emphasized our plan to acquire additional reserves in the onshore Gulf Coast area," Cabot chairman Ray Seegmiller says. The addition of Cody immediately impacts the company, and is a catalyst for future balanced growth, he adds. "Cody gives Cabot's Gulf Coast region a three-year inventory of development drilling locations, plus undeveloped acreage to complement its current inventory of exploration prospects." Cody shareholders will receive $168 million in cash and an estimated $62 million in stock. The cash portion will be funded by Cabot's existing revolving credit and potentially by new private-placement debt. The $62 million of new equity will bring Cabot's pro forma ratio of debt to capital to about 50%, "still below the 52.6% where Cabot ended last year," Seegmiller says.
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