Energy
=DJ Plains E&P Shares Up After $700M Asset Sale To Statoil
=DJ Plains E&P Shares Up After $700M Asset Sale To Statoil
18 Sep 15:08
By Thomas Gryta
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Plains Exploration & Production Co. (PXP) shares surged
more than 10% Monday following a $700 million asset-sale agreement with Statoil
ASA (STO).
Analysts said Plains E&P struck a surprisingly good deal for the offshore
blocks, noting the company's relatively small investment and past deals for
similar assets.
Statoil, the state-controlled Norwegian oil giant, agreed to buy three oil
prospects in the Gulf of Mexico from Plains for $700 million - covering stakes
in two oil finds in deep-water areas and one in a promising offshore block
slated for exploration.
"We think this is a very significant positive for PXP," said analyst Jonathon
Wolff at Credit Suisse, who believes that the company has invested only $40
million to $50 million in the two discoveries. "We are very surprised by the
deal price given that historically very little has been paid for non-proven
reserves, and non-producing, non-operated deep-water assets have been difficult
to sell."
Wolff, who rates the stock at outperform, raised his target price to $55 from
$52 to reflect the deal.
James Flores, Plains chairman, president and chief executive said in a
conference call "there was obviously nothing in our stock price for our
deep-water efforts and probably rightly so. Because of a lot of the
confidentiality agreements we've had in place, we haven't been able to talk
about it too much."
In August, Plains agreed to sell nonstrategic properties, including oil
fields in Texas and California, to Occidental Petroleum Corp. (OXY) for $865
million in cash. Monday's deal also gives Statoil a right to bid on the sales
of additional leasehold interests from Plains. It also adds to the already
sizable amount of sale-related cash that company has seen of late.
Chief Financial Officer Winston Talbert said: "We've got $1.6 billion
basically coming in the door (including the Occidental deal) and we've got
about $1.4 billion of debt if you include the collar hedge liability."
Talber noted that the company plans to use some of the funds on the remaining
$400 million of its stock repurchase plan and for debt reduction in the third
and fourth quarters.
During the call, Flores noted that the company may quickly expand its
exposure to deep-water prospects, even beyond the 15 it currently holds, as an
indirect result of the Statoil deal.
Morgan Keegan's Subash Chandra said Statoil's interest in the assets may
foretell the acquisition of additional interests owned by Anadarko Petroleum
Corp. (APC) and Royal Dutch Shell (RDSA), and also bodes well for those with a
smaller presence.
"The attractive market for minority, non-operated deep-water interests
mitigates the development risk for smaller E&P companies who may not have the
capital cushion to fund expensive development projects," writes Chandra.
Credit Suisse has provided Plains with investment banking services in the
past 12 months.
Shares of Plains recently traded up $4.05, or 10%, to $43.92 on volume of
2.59 million shares, compared with daily average volume of 1.02 million shares.
-Thomas Gryta; Thomas.Gryta@dowjones.com; 201-938-2053
(END) Dow Jones Newswires
09-18-06 1508ET
Copyright (c) 2006 Dow Jones & Company, Inc.
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PXP struck a sweet deal on this asset sale. How about the economics of this deal? I bet you won't see deals like this very often.
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