Puddle,
I have just discovered this thread. I don't see why we need to separate from OS stocks but I am willing to give it a try. The 2 sectors are inextricably linked.
I think APC is a takeover target after the move on Oryx by KerrMcGee.
Here's some news from Reuters:
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10/15 18:35 FOCUS-Kerr-McGee, Oryx to combine in $1.83 bln deal
(New throughout, adds byline; pvs OKLAHOMA CITY) By Brendan Intindola
NEW YORK, Oct 15 (Reuters) - Kerr-McGee Corp. <KMG.N> said Thursday it had agreed to acquire Oryx
Energy Co. <ORX.N> for $1.67 billion in stock, creating the nation's fourth-largest independent oil and
gas exploration and production company.
The transaction, which remains subject to shareholder and regulatory approval, extends a string of
mergers in the industry, motivated primarily by the low price of crude oil, analysts said.
They said the latest combination will relieve Oryx's capital constraints while providing the
less-leveraged Kerr-McGee with potentially valuable prospecting acreage, mostly in the Gulf of
Mexico and the North Sea.
"It fits the mold of recent consolidation we have seen among E&P companies, (driven) mainly by the
desire by the buyer ... to acquire a concentrated portfolio of drilling prospects. That is what Oryx
brings to the table in the Gulf of Mexico," Philip Kehl, analyst at Morgan Stanley Dean Witter, said.
Kerr-McGee, based in Oklahoma City, said it agreed to acquire Dallas-based Oryx by exchanging each
Oryx share for 0.369 newly issued Kerr-McGee shares.
Based on Thursday's closing stock prices, the deal values Oryx at $1.67 billion, or $15.77 a share.
Oryx shares closed at $14.81, up $3.31 a piece, and Kerr-McGee closed at $42.75, down $4.19 a share,
both on the New York Stock Exchange.
Kerr-McGee also will assume $1.3 billion in Oryx debt.
The companies projected savings of more than $100 million annually as a result of the deal, the
majority of which will come by the end of 1999. The deal is expected to increase their earnings and
cash flow in 1999 and thereafter, excluding one-time costs associated with the deal, they said.
"If you look at the Oryx side of the ledger, they are known for their exploration strength, particularly
their deep water technology. They have been hampered a bit ... because of their high leverage,"
Kerr-McGee Chairman Luke Corbett said in an interview.
"You look at Kerr-McGee, our strengths have been in development and exploitation, ... but we have a
very strong balance sheet. So the combination ... going forward we believe creates a much stronger
entity.
"We are creating a company that has $1 billion in discretionary cash flow, and we believe it will
allow us to put a consistent E&P program in front of us, as well as manage our debt," he added.
Norman Rosenberg, Standard & Poor's oil analyst, said, "The match is a very good one because each
brings something to the table. They are a company with an aggressive exploration slant. But from a
financial standpoint, they're maybe not as strong as you would like. They have played with the big
boys, they like the deep water, the Gulf of Mexico."
"What Kerr-McGee brings from the other side, aside from some decent acreage in the North Sea and
Gulf of Mexico, is financial stability, the cash flow," he said.
The companies said that combined they will have reserves of about one billion barrels of oil
equivalent.
Rosenberg said in terms of reserves, the new Kerr-McGee will be fourth behind Unocal Corp. <UCL.N>,
Burlington Resources Inc. <BR.N> and Union Pacific Resources Group Inc <UPR.N>.
Other major E&P companies include Pioneer Natural Resources Co <PXD.N>, the result of the $1.9
billion merger of MESA and Parker & Parsely last year, Enron Oil & Gas Co. <EOG.N> and Anadarko
Petroleum Corp <APC.N>.
Corbett said an undetermined number of jobs would be cut.
The companies said earlier they would have a total of 4,400 employees around the world.
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We are in the middle of a long upward trend in oil price. Short term difficulties are hitting us but things will look a whole lot better in 1999.
Good investing to you all,
Paul.
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