Gas boost: ConocoPhillips boss Jim Mulva
Big hug for ConocoPhillips and Burlington
ConocoPhillips and Burlington Resources have signed a definitive agreement under which ConocoPhillips will acquire Burlington in a transaction valued at $35.6 billion in cash and shares.
Burlington shareholders will receive $46.50 in cash and 0.7214 shares of ConocoPhillips common stock for each Burlington share they own. This represents a transaction value of $92 per share based on the closing price of ConocoPhillips shares on 9 December 2005, said the buyer.
ConocoPhillips said the acquisition would provide it with "extensive, high quality natural gas exploration and production assets, primarily located in North America".
At 31 December 2004, Burlington had total reserves of 2 billion barrels of oil equivalent. In addition, it had estimated 2005 production of 475,000 boe per day.
Burlington's shares, while off their post-Katrina all-time highs, were still up about 75% for the year, with a 16% rise in the preceding month alone, reported Reuters. Burlington's shares closed up $6.41 at $82.50 on 12 December.
Based on the closing market prices for the shares of both companies on 9 December, and their debt levels as of 30 September 2005, the combined company will have an enterprise value of $135 billion ($106 billion of equity; $29 billion of net debt and preferred securities).
ConocoPhillips will fund its acquisition of Burlington through existing cash on hand, existing credit facilities, and new additional bank and bond debt. The company plans to use cash from operations in the years ahead to reduce its outstanding debt.
Jim Mulva, chief executive of ConocoPhillips, said: "With this transaction, ConocoPhillips will expand our portfolio of high quality, low-risk, long-lived gas reserves, and become a leading producer of natural gas in North America. The transaction also enhances ConocoPhillips production growth and North American gas supply position both in the near-term, through projects involving conventional and unconventional resources, and in the long-term through LNG (liquefied natural gas) and Arctic gas projects.
"In addition, the broader Burlington Resources portfolio is an excellent complement to our integrated oil and gas portfolio, and significantly increases our weighting in OECD (Organization for Economic Co-operation and Development) country assets."
Bobby Shackouls, chief executive of Burlington, said: "The combination of ConocoPhillips and Burlington Resources recognizes the substantial value we have created and acknowledges the success of our employees in building a great company with a strong asset base. Of equal importance, this transaction allows our shareholders, customers and employees to participate in the future growth of ConocoPhillips, a company that has the scale and scope to supply consumers from every facet of the oil and gas industry more efficiently."
Upon completion of the merger, Shackouls and Steven Shapiro, Burlington's executive vice president, finance and corporate development, will retire.
Randy Limbacher, Burlington's executive vice president and chief operating officer, will become executive vice president responsible for North and South America..
William Berry, ConocoPhillips' executive vice president-exploration and production, will become executive vice president for Europe, Asia, Africa and the Middle East.
Shackouls and William Wade, currently an independent director of Burlington, will join ConocoPhillips's board. A transition team has been formed and will be led by Limbacher of Burlington and John Lowe, ConocoPhillips' executive vice president-planning, strategy and corporate affairs.