Plains Exploration & Production to Buy Pogo Producing Co. for 1.98 Times Revenue

Weekly Corporate Growth Report, Jul 30, 2007

The Deal: Plains Exploration & Production Company has agreed to purchase Pogo Producing Company for about $3.46 billion in cash and stock. Under the terms of the deal, each share of Pogo Producing will be exchanged for 0.68201 shares of Plains common stock and $24.88 in cash. Based on recent closing prices, the deal values Pogo at approximately $58.24 per share. The combined company will be run by Plains' current management, but two members of Pogo's board will join Plains' board when the deal closes.

Discussion: Pogo Producing is an oil and natural gas exploration and production company operating in the US and Canada. The company also owns 6.3 million leasehold acres in New Zealand and 1.5 million acres in Vietnam. Pogo has proved reserves of 1.2 trillion cubic feet of natural gas and 163.3 million barrels of oil.

Plains Exploration & Production Company explores on- and offshore areas for oil and natural gas. The company operates production sites in the Los Angeles and Jaoquin basins in California, the Santa Maria basin offshore California, the Gulf Coast basin in Louisiana, the East Texas basin, and the Permian basin. The company has estimated proved reserves of 351.7 million barrels of oil equivalent.

The combined company will have a total estimated reserve potential, including possible and probable reserves, of 1.4 billion barrels of oil equivalent. The addition of Pogo's assets will also position Plains to create a master limited partnership.