2010-07-28-2010-07-28-2010-12-20

Acquired American O&G in all-stock deal, gaining 85,000 net acres in North Dakota Bakken.

Hess Corp., New York, (NYSE: HES) has completed the acquisition of Denver-based American Oil & Gas Inc. (NYSE Amex: AEZ) in an all-stock transaction valued at approximately $458 million, adding 85,000 net acres the company's holdings in the play and solidifying its leading position in the North Dakota Bakken oil shale play.

American Oil & Gas had proved reserves of some 874,000 barrels of oil equivalent exiting first-quarter 2010 and currently has no debt. The company's primary Bakken asset is Goliath in Williams County, North Dakota. The Goliath project area comprises approximately 102,000 gross acres (68,000 net acres) and is adjacent to the Nesson Anticline.

Hess issued a total of 8.6 million shares for all outstanding American Oil & Gas shares and options, paying approximately 0.1373 share per American Oil & Gas share at $7.32 per share. The value represents a 9.4% premium based on the closing of Hess and American Oil & Gas' shares on July 27, around the time the deal was announced, at $53.30 and $6.69, respectively.

Hess has committed a $30-million working capital credit facility to help finance American Oil & Gas' planned E&P activities and other working capital needs.

In July, Greg Hill, Hess president, worldwide E&P, said, "This acquisition builds upon our strong land position in the Bakken, leverages our nearby infrastructure and offers operational synergies."

American Oil & Gas chief executive Pat O'Brien also previously noted, "We believe this transaction captures the value that we have been able to create since our initial entry in the North Dakota Bakken play four years ago. We are excited about the leverage our stockholders will gain not only to Hess' compelling Bakken position and developmental activities, but also to Hess' large and diverse global project portfolio."

Goldman, Sachs & Co. was financial advisor to Hess, and Tudor, Pickering, Holt & Co. was financial advisor to American Oil & Gas and also provided a fairness opinion. White & Case LLP and Patton Boggs LLP were legal counsels for Hess and American Oil & Gas, respectively.

Wells Fargo Securities LLC analyst David Tameron values the deal metrics for American Oil & Gas' Bakken acreage position at around $5,392 per acre for 85,000 net acres. The analyst underscores that the headline acreage price is oil and not gas, as the latter "typically trades higher per acreage values given spacing issues." According to Tameron, acreage in the Bakken play "remains hot," with companies coveting the large contiguous positions on land primarily "locked up."

In November, Hess announced plans to take an additional 167,000-net-acre stake in the Bakken from privately held TRZ Energy LLC for some $1.05 billion in cash, bringing the company's total position in the play to 822,000 net acres. The acquisition is the largest in the Bakken since 2008, catapulting Hess to a leading position as the largest acreage holder in the play.