MERGERS-ACQUISITIONS / Pogo Producing Company and Arch Petroleum
Inc. Announce Merger
NYSE SYMBOL: PPP
MAY 29, 1998
HOUSTON, TEXAS--Pogo Producing Company and Arch Petroleum Inc.
(NASDAQ:ARCH) announced today that they have entered into a
definitive agreement and plan of merger that will provide for a
tax-free, stock for stock transaction through which Arch will
become a wholly-owned subsidiary of Pogo. The combined company
would have had 860.7 billion cubic feet of natural gas equivalent
of proved reserves (on a pro forma basis as of year end 1997). The
combined average daily production rate of the two companies for
the first quarter was approximately 203.2 million cubic feet per
day of natural gas and 22,182 barrels per day of liquid
hydrocarbons (including crude oil, condensate and natural gas
liquids).
The merger agreement provides for a fixed exchange ratio of one
share of Pogo common stock for 10.4 shares of Arch common stock.
In addition, holders of Arch preferred stock will receive one
share of Pogo common stock for each 1.04 shares of Arch preferred
stock they hold. Former holders of Arch stock will hold
approximately six percent of Pogo common stock after the merger.
The total number of outstanding Pogo shares after the merger will
be approximately 40,100,000 shares. Based on Arch's closing price
of $2.47 on May 28, 1998, and the assumption of approximately
$48.5 million of Arch's debt and production payment obligations,
the transaction has a total value of approximately $115 million.
Although the merger was unanimously approved by the board of
directors of both Pogo and Arch, the merger is also subject to
approval by Arch's shareholders and to customary regulatory
approvals. Executive officers and directors of Arch, Threshold
Development Corporation and all of the holders of Arch's preferred
stock, representing approximately 47 percent of Arch's outstanding
stock entitled to vote on the merger at the shareholders meeting,
have entered into agreements with Pogo agreeing to vote in favor
of the merger. The merger is expected to close in the third
quarter of 1998 and is also expected to be accounted for as a
pooling of interests and qualify as a tax-free reorganization.
Paul G. Van Wagenen, Pogo's chairman, president and chief
executive officer, said, "We are very excited about the
opportunity to join forces with Arch and its experienced team of
proven oil finders. Arch's West Texas and Permian Basin properties
and operations complement and strengthen Pogo's existing
operations in our core area there, providing the combined entity
with substantial synergistic opportunities and additional
high-grade locations to add to our drilling inventory. We believe
that Pogo's financial strength will enable us to more fully and
rapidly exploit Arch's existing opportunities there. In addition,
we also look forward to integrating Arch's highly successful
Canadian subsidiary into our international operations. Its
inventory of highly prospective Canadian acreage and prospects are
just beginning to be explored and developed, and will provide Pogo
with another international area that will complement Pogo's
existing successful operations in the Kingdom of Thailand, further
diversifying Pogo's international exploration and production
efforts. In addition, this combination also provides Pogo with a
valuable entryway into Canadian exploration opportunities, which
Pogo has been actively pursuing for some time."
Larry Kalas, Arch's president and chief executive officer, said,
"This combination will permit Arch to accelerate the pace and
scope of its exploration efforts, both in the United States and in
Canada. We believe that the financial strength of the combined
entity, coupled with its significant upside potential in its
domestic and international operations, will provide an excellent
opportunity for shareholders to realize significant future value
from the combined entity."
Pogo Producing Company primarily explores for, develops and
produces oil and natural gas. Headquartered in Houston, Pogo owns
interests in 103 (assuming the remaining two high bid tracts from
the recent federal OCS lease sale are awarded) federal and state
Gulf of Mexico lease blocks offshore Louisiana and Texas. After
the merger Pogo will own interests in approximately 378,000 gross
leasehold acres in major oil and gas provinces onshore in the
United States and approximately 734,000 gross acres in the Kingdom
of Thailand and approximately 142,000 gross acres in the Dominion
of Canada. Pogo common stock is listed on the New York Stock
Exchange under the symbol PPP. Arch common stock is listed on the
NASDAQ National Market System under the symbol ARCH.
Certain statements in this news release regarding future
expectations, potential results of the business combination, plans
for oil and gas exploration, development and production may be
regarded as "forward looking statements" within the meaning of the
Securities Litigation Reform Act. They are subject to various
risks, such as operating hazards, drilling risks, and the inherent
uncertainties in interpreting engineering data relating to
underground accumulations of oil and gas as well as other risks
discussed in detail in the SEC flings of Pogo and Arch, including
the Annual Reports on Form 10-K for the year ended December 31,
1997. Actual results may vary materially. |
