Mesa to Sell Assets, Cut Debt Almost 30%

Mesa Limited Partnership agreed to sell a portion of its portfolio to Seagull Energy Corp. in a deal that could reach nearly $500 million and cut debts of T. Boone Pickens Jr.’s Mesa by nearly one-third, it was announced Wednesday.

Under terms outlined in a letter of intent, Houston-based Seagull will pay $376 million in cash for the properties, reserves and acreage and assume $50 million in liabilities.

Mesa also would receive up to an additional $50 million in 1994, based on the weighted average price of natural gas sold from the properties between 1991 and 1993.

The deal covers about 15% of the oil and gas company controlled by Pickens. It is subject to approval by Seagull’s board and is expected to close in December.

“It effectively reduces Mesa’s reserves by only 15% yet allows us to reduce our net debt by nearly 30%,” said Mesa spokesman Jay Rosser.

Mesa’s current debt of $1.4 billion would be cut to about $1 billion if the deal is successful, he said.

The assets to be purchased include Mesa’s Mid-Continent, Rocky Mountain and Gulf Coast offshore properties and operations.

“These properties will greatly diversify our total reserve portfolio, give us significant reserve positions and exploratory prospects in geographic areas other than our historic Gulf Coast area of emphasis, and extend the average reserve life of our company’s reserves,” said Seagull Chairman Barry J. Galt.

Seagull spokesman Alan Payne said the deal would increase the company’s assets from $391 million as of June 30 to $751 million.

Pickens said the sale would help Mesa increase “our concentration of high-quality, long-life properties,” strengthen the company’s balance sheet and, “through the gas price participation, (retain) a meaningful interest in the upside on the properties being sold.”

Mesa has total assets of $2.6 billion.