Privately held Riata Energy Inc., Oklahoma City, has made a bid to acquire Dallas-based NEG Oil & Gas LLC, a subsidiary of American Real Estate Partners LP (AREP), for an aggregate consideration of $1.5 billion in cash and shares.

As part of the offer, Riata would issue 12.8 million common shares at $19 each. The balance, $1.025 billion, would be cash. Riata would also assume up to $300 million of NEG debt and receive $50 million in working capital.

The transaction includes the membership interests of NEG Holding LLC held by National Energy Group Inc. (OTCBB: NEGI). The deal would not include any equity ownership of National Energy Group.

Tom Ward, Riata chairman and chief executive, says, "This transaction continues to focus Riata on our largest asset, the West Texas Overthrust Belt." Upon closing, Riata will have more than an 83% working interest in the Pinon Field and more than 260,000 net acres in the West Texas Overthrust Belt.

Pro forma production will more than quadruple, and the company plans a 20-rig drilling program in the field by year-end 2007. "We would also expand our core area of operations to include East Texas, the Gulf Coast and the Gulf of Mexico," Ward says.

Carl Icahn, AREP chairman, says, "AREP's investment in NEG Oil & Gas has proven to be tremendously successful. I commend Bob Alexander [chief executive] and his team for their efforts in building a great company. We believe that by combining these assets with Riata they will be positioned to grow to the next level."

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