Dominion boosting gas reserves 60%

Virginia company to buy Louis Dreyfus business for $2.3 billion

`Now is a good time'

September 11, 2001|By BLOOMBERG NEWS

OKLAHOMA CITY - Dominion Resources Inc., which owns Virginia's largest utility, agreed yesterday to acquire Louis Dreyfus Natural Gas Corp. for $2.3 billion in cash, stock and assumed debt to increase its natural gas reserves by 60 percent.

Dominion will pay $20 in cash and 0.3226 share for each Louis Dreyfus share. Dominion will assume about $505 million in debt.

The purchase will double the size of Dominion's energy trading operations over three years, and leave it with an estimated 4.6 trillion cubic feet of gas and oil reserves to supply utility customers and fuel power plants.

"It fits in with their exploration and production strategy," said Tara Gately, an analyst at Loomis Sayles & Co. "The outlook for natural gas over the long-term is positive."

The purchase is the third major acquisition of an oil and gas explorer in a month. Falling gas prices in 2001 pushed down share prices of exploration and production companies, making them more attractive takeover targets, analysts said.

Last week, Devon Energy Corp. agreed to buy Anderson Exploration Ltd. of Canada for $4.13 billion to become the largest independent producer of North American oil and gas. And Santa Fe International Corp. has agreed to buy rival Global Marine Inc. for $3.49 billion, creating the second-largest company renting offshore rigs to the oil-exploration industry.

Dominion expects gas-trading volumes to increase to 2.4 trillion cubic feet annually, and electricity trading to increase to 265 million megawatt hours in the three years after the purchase, the statement said.

A megawatt hour is enough to light about 1,000 U.S. homes for an hour.

"Now is a good time to get in because we see (U.S.) gas demand growing at about 3.25 percent, but production growing at about 2 percent," said Chief Executive Officer Thomas Capps.

Dominion said it expects Louis Dreyfus to add 5 cents a share to 2002 earnings.

The purchase won't change its earnings this year, the company said. Dominion estimated that it will make at least $4.15 a share in 2001, and $4.85 to $4.90 a share in 2002.

In addition to managing its trading operations, Louis Dreyfus drills for gas and oil in the Permian Basin of western Texas and eastern New Mexico, parts of Oklahoma and Kansas, the Gulf of Mexico, and eastern Texas and western Louisiana.

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