ACQUISITIONS / Tarragon Oil & Gas Acquires Unocal Canadian Assets
TARRAGON OIL AND GAS LIMITED ANNOUNCES STRATEGIC INITIATIVE WITH
UNOCAL
CALGARY, Feb. 13 /CNW/ - Tarragon Oil and Gas Limited announced today
that it has reached an agreement with Unocal Canada Limited whereby Unocal
will contribute substantially all of its petroleum and natural gas assets in
Alberta and British Columbia to Tarragon in exchange for 21 million Tarragon
common shares issued from treasury and a C$100 million subordinated debenture.
Based on a share price of $9.90, representing the closing price of
Tarragon shares on February 11, 1998, this transaction is valued at C$308
million, of which $266 million is allocated to reserves and $42 million to
undeveloped lands totaling 365,000 net acres, seismic data, and tax pools.
Unocal's share position will make it a 27 percent owner of Tarragon on a fully
diluted basis.
The transaction has the unanimous support of the boards of directors of
both companies and is scheduled to close on April 15, 1998. It is subject to
regulatory approvals and shareholders' approval as the transaction involves
the issuance of more than 25 percent of Tarragon's outstanding shares. Morgan
Stanley & Co. Incorporated represented Tarragon in connection with the
transaction and will be providing a fairness opinion.
Tarragon's President and Chief Executive Officer Ed Chwyl said, ''This is
a great business deal that makes strategic and financial sense and furthers
the growth of our company at a fair price. It expands our holdings in selected
areas of western Canada. It strengthens our conventional oil and natural gas
asset portfolio. It involves a large equity injection which improves our
balance sheet and adds production at a price which makes the deal accretive to
cash flow and earnings. It brings us an important and supportive shareholder
while enabling us to remain in control of our own destiny. Most important, it
will create substantial long term value for our shareholders.''
Established reserves (proved plus 50 percent probable) of 43.7 million
barrels equivalent are being acquired at $6.09 per barrel equivalent. These
reserves consist of 23.1 million barrels of light sweet crude oil, 5.0 million
barrels of natural gas liquids, and 156 billion cubic feet of liquids rich
natural gas. Tarragon's pro forma reserves become 25 percent conventional oil
and liquids, 35 percent heavy oil, and 40 percent natural gas.
Production is very concentrated, with six properties accounting for 98.7
percent of the total. Two properties (Red Earth and Slave) are on the Peace
River Arch, where Tarragon has wanted to establish a core area for some time.
The remaining four properties (Kakwa, Kaybob, Sturgeon Lake and Virginia
Hills) are all in west central Alberta and will supplement Tarragon's existing
holdings in that area. Most of the properties contain significant exploitation
potential.
The properties produced an average of 14,200 barrels of oil equivalent
per day in 1997, consisting of 8,900 barrels of light sweet crude oil, 1,500
barrels of liquids, and 38.0 million cubic feet of natural gas. Tarragon
expects to increase production to nearly 20,000 barrels of oil equivalent per
day over the next three years.
Preliminary 1998 pro forma production estimates are 16,500 barrels per
day of conventional oil, 8,000 barrels per day of heavy oil, and 215 million
cubic feet of natural gas, including Unocal production commencing April 15,
1998. Giving account for a full year's contribution from the Unocal
properties, Tarragon's 1998 production profile becomes 40 percent conventional
oil, 15 percent heavy oil, and 45 percent natural gas. Although capital
programs will not be finalized until after the closing of this transaction,
Tarragon expects to spend in the range of $200 million on the combined
properties.
''Tarragon is a strong growth company with a record of low operating and
finding and developing costs,'' said Charles R. Williamson, Unocal group vice
president for International Operations. ''Joining with an aggressive company
like Tarragon will enable us to realize the full value of these Canadian
assets for our stockholders and participate in the growth potential of
Tarragon's other operations, while allowing our management team to focus on
Unocal's strategic, long-term oil and gas growth opportunities.''
Mr. Chwyl said, ''We have taken the necessary steps to maintain the
independent and entrepreneurial spirit which has guided Tarragon from its
beginning. A shareholders' agreement between Tarragon and Unocal formalizes
those steps.''
Under that agreement, Unocal has agreed to vote its shareholdings
exceeding 20 percent in the same ratio as the other shareholders on certain
fundamental issues; cap its ownership in Tarragon at its initial percentage;
hold its shares for a minimum of two years, subject to certain conditions; and
have proportional board representation. The Tarragon board will be expanded to
eleven members to accommodate the three Unocal nominees, of which at least one
will be an independent director.
Tarragon has agreed to pay a non-completion fee of $37.2 million under
certain conditions. Both parties have agreed not to solicit other transaction
proposals and to disclose to each other the terms of any unsolicited
approaches.
Mr. Chwyl concluded, ''We are delighted with this transaction. It adds
substantial exploitation opportunities in conventional oil and gas. It
deleverages our balance sheet to the extent that we can again pursue our
aggressive growth strategy. It is accretive to cash flow and to earnings. In
addition, Unocal has aligned itself with Tarragon's other shareholders in a
unique way. We look forward to a long and mutually beneficial relationship in
the years ahead.''
Tarragon Oil and Gas Limited is a Canadian-owned exploration and
production company whose mission is to build assets and cash flow through
exploration, development, and selective asset purchases in western Canada. Its
common shares trade on the Toronto and Montreal stock exchanges under the
symbol TN.
ADDED ANNOUNCEMENT
ADVISORY - TARRAGON OIL AND GAS LIMITED
ARRANGEMENTS FOR REBROADCAST OF ANALYST CONFERENCE CALL
CALGARY, Feb. 13 /CNW/ - Earlier today, Mr. Ed Chwyl, President and CEO
of Tarragon Oil and Gas Limited, hosted a telephone briefing for analysts in
order to discuss today's announcement of a strategic initiative with Unocal
Canada Limited.
A taped rebroadcast of the call will be available for 48 hours by dialing
1-800-558-5253 and providing the operator with reservation number 3867147. |
