Pogo Producing Co., Houston, (NYSE: PPP) plans to acquire privately held Latigo Petroleum Inc., Tulsa, Okla., and its assets in the Permian Basin and Texas Panhandle for a total cash purchase price of $750 million. Pogo will finance the acquisition using cash on hand, its existing revolving credit facility and potential capital market transactions. Closing is expected in May. At closing, Pogo will acquire 275 billion cubic feet of natural gas equivalent (Bcfe) of estimated proven reserves on approximately 404,700 net acres. Latigo's reserves are 49% gas and 51% oil. After allocating $60 million of the purchase price to Latigo's leasehold acreage position and its new 3-D seismic database, Pogo's acquisition cost per estimated proven reserves would be $2.51 per thousand cubic feet equivalent. The deal is expected to increase Pogo's total proven oil and gas reserves by 13%, from 2,042 Bcfe to 2,317 Bcfe; complement Pogo's core operating area; extend its indicated reserves life to approximately 10 years; and add more than 400 development and exploration drilling locations to Pogo's inventory. Latigo was formed by Latigo management, Warburg Pincus LLC and JPMorgan Partners in 2002. Approximately 40% of Latigo's reserves and 50% of its production are in the panhandle of Texas. The company's development activities are also concentrated in Texas, including the Collie Field in Reeves and Ward counties, and the Courson Ranches areas in Roberts and Ochiltree counties. Latigo has seven rigs operating and Pogo's drilling plans include adding two more rigs and drilling more than 100 locations. "Latigo will provide Pogo with a balanced portfolio of proven reserves, low-risk development and extensive exploration opportunities," says Paul G. Van Wagenen, chairman and chief executive. "The addition of Latigo's properties, in one of Pogo's most active geographic areas, will result in significant, cost-effective growth."
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