Conoco to Buy Gas Producer Burlington
ConocoPhillips agreed to buy U.S. natural-gas producer Burlington Resources Inc. for $35.6 billion in cash and stock, bolstering its reserves as Chairman James Mulva seeks to rival the world’s largest oil companies.
ConocoPhillips, the third-biggest U.S. oil and gas producer, will pay $46.50 a share in cash and 0.7214 share for each share of Burlington, the company said Monday in a statement. The takeover is the industry’s biggest since Chevron Corp. agreed to buy Texaco Inc. in 2001.
Mulva, 59, is using acquisitions to catch up with Chevron, the No. 2 U.S. oil company, as oil and gas fields become harder to find and more expensive to tap. ConocoPhillips pumped more from reserves last year than it replaced through exploration. Half the crude oil it produces is from older fields in Alaska and Norway that yield less each year.
“They want to get closer to Chevron,” said Mark Zvonkovic, a partner who oversees energy mergers at the New York law firm Akin Gump Strauss Hauer & Feld. “Acquiring Burlington would bring them closer to the super majors,” he said, referring to companies such as Exxon Mobil Corp., the world’s biggest publicly traded oil company, and BP, the second-largest.
Soaring energy prices are spurring acquisitions, said Kurt Wulff, an analyst at McDep Associates in Needham, Mass. U.S. natural gas climbed to a record last week and crude oil reached an all-time high in August. ConocoPhillips is buying Burlington “out of optimism about the price of natural gas,” said Wulff, who owns shares of both.
Burlington shares rose $6.41, or 8%, to $82.50. ConocoPhillips fell $1.82, or 3%, to $61.25.
ConocoPhillips shareholders and analysts say the deal marks an acknowledgment that, with oil and gas prices as high as they are, North America is once again an attractive place to produce for the major companies.
“You are seeing them redirect their attention back to North America after essentially abandoning and disposing of assets over the last couple of years,” said Todd Lowenstein, co-manager of the HighMark Value Momentum Fund in Los Angeles.
The deal would boost ConocoPhillips’ U.S. gas reserves, excluding Alaska, by 88% to 8 trillion cubic feet, according to company filings. It would increase U.S. gas output by 77%.
