Energy, Energy Service, Natural Gas & Oil Sectors: Barrett Resources (BRR) buyout

» JenL_2 - Barrett Resources (BRR) buyout

Let's get back to talking about investing in the energy sector. This from 5/7 WSJ:

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Williams Is in Talks to Pay $2.3 Billion In Cash, Stock for Barrett Resources

By ROBIN SIDEL, NIKHIL DEOGUN and ALEXEI BARRIONUEVO

Williams Cos. (WMB) is in advanced discussions to buy Barrett Resources Corp. (BRR) for at least $2.3 billion in cash and stock, topping a hostile $2 billion cash bid from Shell Oil Co., according to people familiar with the matter.

The two companies were holding talks over the weekend, and it wasn't clear if and when they would reach agreement. Furthermore, it wasn't clear what move, if any, Shell might make to counter a Barrett-Williams deal. Shell, a unit of Anglo-Dutch titan Royal Dutch/Shell Group (RD), has deep pockets, but has vowed not to overpay for acquisitions. Shell sweetened its original bid but chose not to participate in the formal bidding after it put Barrett "in play," presumably because it would have had to drop its hostile offer.

The proposed Williams bid values Barrett in the low $70s per share, a sizable premium to Shell's $60 a share cash offer, the people said. Indeed, shares of Barrett have been rising steadily on views that a successful bidder would likely pay at least $70 a share for Barrett. At 4 p.m. Friday, Barrett was up 65 cents to $67.30 in New York Stock Exchange composite trading. While Shell has much deeper pockets, Williams' stock is an attractive currency with which to do deals, takeover traders say.

But some of the Williams bid premium could evaporate if its stock falls in reaction to news of the Barrett talks. The amount of stock and cash in the offer couldn't immediately be determined. Williams also would likely seek a significant breakup fee in case it eventually loses Barrett to Shell or another suitor.

A Williams spokesman declined to comment. A Barrett spokesman couldn't be reached for comment.

A spokesman for Shell said the company wouldn't comment "on any rumored transaction until we have seen the details of a formal announcement. However, we are disappointed that Barrett's management refused repeated attempts to meet with us even after our public commitment to negotiate all terms of a friendly transaction, including price."

Williams, Tulsa, Okla., was one of at least two companies, other than Shell, that last week submitted bids for Barrett, a Denver-based producer of natural gas. Williams was forced to disclose its interest in Barrett last week when Wall Street analysts mistakenly were patched into a conference call in which board members were discussing a potential bid.

Barrett put itself up for sale in March when it rejected Shell's initial $55-a-share offer. Devon Energy Corp., Oklahoma City, also made an offer; other potential bidders in recent weeks had lost interest.

Although it is a relatively small player, Barrett is coveted for its significant presence in the Rocky Mountain region, which is becoming increasingly valuable to gas producers because of declining production in traditional markets of Texas and the Gulf of Mexico.

Williams, in addition to producing natural gas, has significant gas-storage and -transportation operations. It posted 2000 revenue of $10.4 billion, and its net income in 2000 more than doubled, to $524.3 million from $221.4 million.

Should Shell lose out to Williams, it would mark the second big takeover defeat for the big oil company in just a few weeks. The Australian government last month blocked Shell's $5.1 billion unsolicited bid for Woodside Petroleum Ltd., citing "national interest" concerns.

In 4 p.m. composite trading Friday on the New York Stock Exchange, Williams was up $1.01 to $41.67.

Williams isn't known as a big oil and natural-gas producer. Buying Barrett could help shore up Williams' modest exploration and production operations in the Rocky Mountain region and give it more gas to sell to feed the power plants it controls. Williams has 1.2 trillion cubic feet of proven natural-gas reserves, mostly in Colorado, New Mexico and Wyoming.

Williams has one of the largest natural-gas pipeline systems in the country, with 11,300 miles of pipe, and also has emerged as a big player in the trading of natural gas and electricity. The company has been swimming in trading revenue and profit from the volatility in the natural-gas and electricity-futures markets.
Marketing and trading revenue ballooned by $912.4 million, more than doubling, in 2000. In the first quarter, the company's overall profit was $484.5 million, up from $77.8 million the year before. Much of that profit has come as a result of California's power crisis. The company has long-term contracts to market 7,000 megawatts of electricity-generating capacity, some 4,000 of that at facilities in California.

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WMB, BRR, RD S&P500

.....Jen

-- posted by JenL_2