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Norsk Hydro to Buy U.S. Oil, Gas Firm

From Associated Press

Norsk Hydro, an Oslo-based petroleum and aluminum producer, said Monday that it had agreed to buy Houston-based oil and natural gas company Spinnaker Exploration Co. for $2.45 billion to boost its presence and growth potential in the Gulf of Mexico.

Norsk Hydro said it would pay $65.50 a share in cash for all outstanding common shares and options of Spinnaker, a 34% premium to the Friday close of $48.75. Spinnaker shares rose $15.40 to $64.15 on Monday after the announcement.

Norsk Hydro shares rose 1% in Oslo trading.

Norsk Hydro also said it would assume about $110 million in Spinnaker debt. The deal is subject to approval by Spinnaker shareholders and U.S. regulators.

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The Oslo-based company said the deal had been approved by the boards of both companies and was expected to be completed in the fourth quarter.

Spinnaker has production and exploration assets primarily in the Gulf of Mexico. After completion of the acquisition, Norsk Hydro expects annual international production growth of about 40% from 2005 to 2008.

“We believe that the deep-water potential in the Gulf of Mexico is considerable,” said Norsk Hydro President and Chief Executive Eivind Reiten. He said his company’s deep-water expertise, combined with Spinnaker’s skills and acreage position in the region, would allow the company to develop those prospects profitably.

Tor Torvund, vice president of Norsk Hydro’s oil and natural gas division, said Spinnaker’s employees had excellent knowledge of the Gulf of Mexico and were one of the reasons Norsk Hydro wanted the company.

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Next year, the U.S. government is expected to auction a large amount of pre-leased blocks in the western and central part of the Gulf of Mexico, and industry experts say many more acres will be available than previously offered.

“There’s a huge interest in the leasing round,” Torvund said. “We’ve been wanting to get into the Gulf of Mexico, and with the experienced staff, we’ll find the right leases.”

Norsk Hydro said last year that it was looking to grow on its own and through acquisitions. But analysts said it had been too conservative, losing out to the competition. This year, the company lost a bidding battle with rival Statoil for EnCana Corp.'s $2-billion Gulf of Mexico assets.

Norsk Hydro said Spinnaker’s current production capacity was 23,000 barrels of oil equivalent a day, but output would increase to an estimated 50,000 barrels by 2008.

Oil equivalents measure the energy content rather than the volume of oil and natural gas.

“It’s a fairly high price, but due to the substantial upside potential, it may be worth it,” said analyst Arnstein Wigestrand at Enskilda Markets in Oslo.


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