Two Houston-based exploration and production companies made big news on Tuesday as Plains Exploration & Production Co. agreed to buy Pogo Producing Co. for $3.42 billion in cash and stock. The Houston Chronicle story on the transaction is here.
Plains will pay $1.5 billion in cash and issue 40 million of its shares to purchase Pogo, which has been the subject of acquisition rumors for months as dissident shareholder Third Point LLC expressed disappointment with Pogo’s financial performance and the legacy management team of Pogo founder, chairman and CEO, Paul Van Wagenen. Pogo shareholders will receive 0.68201 share of Plains Exploration and $24.88 in cash for each share of Pogo they own, which values each Pogo share at $57.53. Pogo shareholders will hold a 34% stake in Plains Exploration and two Pogo board members board will join Plains’ board when the deal closes in the fourth quarter of this year.
The acquisition will nearly double Plains’ estimated-reserve potential to 1.4 billion barrels of oil equivalent and provide the company with substantial onshore producing properties in the Texas Panhandle and Permian and Gulf Coast regions, as well as the Madden Field in Wyoming and the San Juan Basin in New Mexico.
Pogo, which agreed in May to sell its Northrock Resources unit for $2 billion to Abu Dhabi National Energy Co., saw the markets greet the announcement with enthusiasm as the comany’s shares rose $7.02 (or 14%) to $57.50 as of 4 p.m. in New York Stock Exchange composite trading. On the other hand, Plains stock was off $3.31, or 6.5%, to $47.88.
Bully for Mr. Van Wagenen, who is one of the classiest and most pleasant CEO’s in the Houston business community.