Forest Oil to Acquire the Houston Exploration Company for $1.5 Billion
08 1월 2007 - 1:20PM
Business Wire
Forest Oil Corporation (NYSE:FST) (Forest or the Company) today
announced it has entered into a definitive agreement to acquire
100% of the outstanding stock of The Houston Exploration Company
(NYSE:THX) (Houston Ex) in a stock and cash transaction totaling
approximately $1.5 billion plus the assumption of net debt
estimated to be $100 million at December 31, 2006. Forest Oil
worked with JANA Partners LLC (JANA), the holder of 14.7% of the
outstanding shares of Houston Ex, with the result that JANA has
agreed today to vote in favor of the transaction. JANA has also
agreed not to propose any extraordinary transactions with Forest or
to seek to influence the management or control of Forest for a year
following the close of the transaction. The transaction positions
Forest as one of the top independent onshore North American
exploration and production companies. The acquisition will also
create a highly concentrated and complementary set of oil and
natural gas assets focused in all regions of Texas. On a pro forma
basis at December 31, 2005, the Company would have estimated proved
reserves of approximately 2.0 trillion cubic feet of natural gas
equivalents (Tcfe) of which approximately 69% would be classified
as proved developed and approximately 70% would be natural gas. H.
Craig Clark, Forest�s President and Chief Executive Officer,
stated, �We are undertaking this significant acquisition to further
strengthen our onshore North American asset base and to add
drilling inventory for our proven acquire and exploit strategy.
This strategy has provided us with superior risk weighted returns
over the last several years. This acquisition will add in excess of
3,200 drillsites to our existing inventory. Furthermore, these
assets are located in tight gas sand basins in which we have
extensive experience and have recently benefited from new
technological applications like horizontal drilling and fracture
stimulation. We believe that our stated organic growth goals can be
achieved in the foreseeable future within our existing free-cash
flow model. In order to reduce our leverage and to further narrow
our geographic focus, we will seek to sell our Alaskan entity in
2007.� William G. Hargett, Chairman, President and Chief Executive
Officer of Houston Ex, said, �Over the past year, we have made
significant progress in improving Houston Exploration�s operations
and creating a more focused asset portfolio. Our agreement with
Forest builds on this solid foundation and represents a successful
conclusion to the strategic review that our Board and management
team began last year to enhance shareholder value and develop an
even stronger future for our company. The transaction with Forest
not only provides immediate value to Houston Exploration�s
shareholders, but also affords them the opportunity to participate
in the upside potential created by our combination. I am confident
that together with Forest, we will have the financial and
operational strength needed to continue capturing the opportunities
in our industry.� Barry Rosenstein, JANA�s Managing Partner,
stated, �Given the current environment, we believe this is a good
deal and we have confidence that Forest Oil is the right company to
maximize the value of these assets. Forest Oil has a strong track
record of keeping F&D costs and operating expenses low, and its
disciplined management team has maintained some of the most
favorable cost controls in the industry during the inflationary
period of the last several years. In addition, we believe there are
significant synergies, particularly given Forest Oil�s demonstrated
expertise in analogous acquisitions and the direct overlapping
acreage positions in the combined portfolio." TRANSACTION DETAILS
Under the terms of the agreement, Houston Ex shareholders will
receive total consideration equal to 0.84 shares of Forest common
stock and $26.25 in cash for each share of Houston Ex common stock
outstanding, or an estimated 23.6 million shares of Forest common
stock and cash of $740 million. This represents $52.47 per share of
consideration to be received by the Houston Ex shareholders based
on the closing price of Forest shares on January 5, 2007. The exact
amount of the total cash and stock consideration to be received by
each Houston Ex shareholder will be determined by elections and an
equalization formula. It is anticipated that the transaction will
be tax free to Houston Ex and the stock portion of consideration
will be received tax free by its shareholders. The cash component
of the acquisition is expected to be financed with a new $1.4
billion revolving credit facility which has been underwritten by
JPMorgan Chase Bank, N.A. The boards of directors of Forest and
Houston Ex have each unanimously approved the transaction. The
transaction is subject to regulatory approvals and other customary
conditions, as well as both Forest and Houston Ex shareholder
approval. Forest management and its board of directors will
continue in their current positions with Forest, and it is
anticipated that Forest will create a new business unit to be
located in Houston. Credit Suisse Securities (USA) LLC acted as the
financial advisor and Vinson & Elkins LLP acted as the legal
advisor to Forest for this transaction. ACQUISITION RATIONALE AND
PRO FORMA INFORMATION Acquisition Rationale Forest believes this
merger will result in an outstanding investment for both companies�
shareholders going forward for the following key reasons: --
Creates a leading independent onshore producer with, on a pro forma
basis, the following estimated attributes: -- 2.0 Tcfe of estimated
proved reserves -- 6,000 + identified drilling opportunities -- 520
MMcfe/d of production -- Combined position in the South Texas and
Greater Carthage Areas (East Texas) represents two premier operated
core tight gas assets with significant exposure to recent
horizontal drilling opportunities. -- Strong production base and
acreage position in the Arkoma Basin that is near the emerging
Fayetteville Shale play. -- Increases Forest's exposure to the
Rockies with a significant acreage position and approximately 1,900
identified drilling locations in the Denver - Julesburg Niobrara.
-- Immediate accretion to Forest shareholders on a cash flow,
production and reserves per share basis. -- Rationalization and
prioritization of project inventory and capital of combined entity
is anticipated to result in estimated organic production growth of
7% - 8% within Forest's free cash flow model. -- Operational and
corporate synergies including the utilization of Forest's Lantern
drilling rigs are anticipated to result in an estimated decrease of
10% - 15% in cash costs per unit, and improved finding and
development costs. -- Significantly increased presence in major
basins in Texas should result in additional opportunities in the
acquisition market. Pro Forma Information Pro forma statistics for
Forest include: Forest HoustonEx Total Proved Reserves (Bcfe)
1,340� (a) 655� (b) 1,995� Proved Developed Reserves (Bcfe) 946�
(a) 429� (b) 1,375� Proved Developed Reserve % 71� (a) 65� (b) 69�
Production (MMcfe/d) (b) 313� 204� 517� Net Acreage (M) (12/31/05)
5,623� 709� 6,332� R/P Ratio (Years) 11.7� 8.8� 10.6� Fully Diluted
Shares O/S (M) 63,484� (b) 23,638� (c) 87,122� � (a) Includes
estimated proved reserves at December 31, 2005 pro forma for
estimated proved reserves distributed in the Mariner Energy, Inc.
transaction, estimated proved reserves acquired in the Cotton
Valley transaction and independently prepared proved reserve
estimates for Forest Alaska Operating LLC. (b) Composite statistics
are for the quarter ended September 30, 2006. (c) Outstanding
shares multiplied by 0.84 per share exchange ratio. PRO FORMA
BUSINESS PLAN Forest intends to decrease overall capital
expenditures in the combined company and to reallocate the capital
expenditures being spent on the Houston Ex assets. Under Forest�s
pro forma business plan, 2007 capital expenditures for the combined
company would be approximately $900 million and 2007 estimated
production would be 540 MMcfe/d. However, as the acquisition is not
anticipated to occur until the second quarter of 2007, Forest is
unable to issue formal guidance for the combined company at this
time. Upon closing of the acquisition, Forest intends to issue
guidance for the remaining period in fiscal year 2007.
TELECONFERENCE CALL Forest�s management will hold a teleconference
call on January 8, 2007 at 9:00 am ET to discuss the items
described in this press release. If you would like to participate
please call 1.800.399.6298 (for U.S./Canada) and 1.706.634.0924
(for International) and request the Forest Oil teleconference (ID #
5889781). A replay will be available from Monday, January 8 through
January 15, 2007. You may access the replay by dialing toll free
1.800.642.1687 (for U.S./Canada) and 1.706.645.9291 (for
International), and request the Forest Oil teleconference replay,
conference ID # 5889781. Forest Oil Corporation is engaged in the
acquisition, exploration, development, and production of natural
gas and liquids in North America and selected international
locations. Forest's principal reserves and producing properties are
located in the United States in Texas, Louisiana, Oklahoma, Utah,
Wyoming and Alaska, and in Canada. Forest's common stock trades on
the New York Stock Exchange under the symbol FST. For more
information about Forest, please visit our website at
www.forestoil.com. FORWARD-LOOKING STATEMENTS This news release
includes forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements, other than statements of
historical facts, that address activities that Forest assumes,
plans, expects, believes, projects, estimates or anticipates (and
other similar expressions) will, should or may occur in the future
are forward-looking statements. The forward-looking statements
provided in this press release are based on the current belief of
management of Forest, as applicable, based on currently available
information, as to the outcome and timing of future events. Forest
cautions that their respective future natural gas and liquids
production, revenues and expenses and other forward-looking
statements are subject to all of the risks and uncertainties
normally incident to the exploration for and development and
production and sale of oil and gas. These risks include, but are
not limited to, price volatility, inflation or lack of availability
of goods and services, environmental risks, drilling and other
operating risks, regulatory changes, the uncertainty inherent in
estimating future oil and gas production or reserves, and other
risks as described in Forest's 2005 Annual Report on Form 10-K as
filed with the Securities and Exchange Commission. Also, the
financial results of Forest's foreign operations are subject to
currency exchange rate risks. Any of these factors could cause
actual results and plans of Forest to differ materially from those
in the forward-looking statements. Forest and Houston Ex will file
materials relating to the proposed transaction with the SEC,
including one or more registration statement(s) that contain a
joint proxy statement/prospectus. Investors and security holders of
Forest and Houston Ex are urged to read the definitive joint proxy
statement/prospectus (if and when they become available) and any
other relevant documents filed with the SEC, as well as any
amendments or supplements to those documents, because they will
contain important information about Forest, Houston Ex and the
acquisition. A definitive joint proxy statement/prospectus will be
sent to security holders of Forest and Houston Ex seeking their
approval of the acquisition. Investors and security holders may
obtain these documents free of charge at the SEC's website at
www.sec.gov. In addition, the documents filed with the SEC by
Forest may be obtained free of charge from Forest's website at
www.forestoil.com or by calling Forest�s investor relations
department at 303.812.1400. The documents filed with the SEC by
Houston Ex may be obtained free of charge from Houston Ex's website
at www.houstonexploration.com or by calling Houston Ex�s investor
relations department at 713.830.6800. Investors and security
holders are urged to read the joint proxy statement/prospectus and
the other relevant materials when they become available before
making any voting or investment decision with respect to the
proposed acquisition. Forest, Houston Ex and their respective
directors, and executive officers may be considered participants in
the solicitation of proxies in connection with the proposed
transaction. Information about the participants in the solicitation
will be set forth in the joint proxy statement/prospectus when it
becomes available.
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