Tulsa-based Samson Investment Co., Pyr Energy Corp. reach takeover

Journal Record, The (Oklahoma City), Apr 12, 2007 by Kirby Lee Davis

Two days after attacking Samson Investment Co. for reneging on a natural gas processing deal, Pyr Energy Corp. announced its endorsement Wednesday of a Samson buyout offer valued at $49.39 million.

That represents nearly a $4 million premium on the hostile bid Tulsa-based Samson launched in late March for the Denver oil and gas exploration company - an amount Samson last week indicated could be reduced due to poor well test results.

The two boards of directors ironed out their differences Monday - the same day Pyr recorded double- and triple-digit financial increases for its second fiscal quarter, but also the day developing legal problems over Samson processing contracts were revealed.

As it began its takeover attempt, Samson mentioned it might reduce its offer depending on test results of the Nome-Harder No. 1 well. Pyr owns a 4.16-percent working interest in that Jefferson County, Texas, project.

On Thursday, Samson said the well failed to match expectations and performed substantially below results achieved in the Nome-Long No. 1 well drilled earlier in the county.

Four days later, Pyr said it was still awaiting results on the Nome-Harder No. 1 - and while Nome-Long No. 1 was producing 6.8 million cubic feet of natural gas and 236 barrels of oil per day, Pyr said Samson Lone Star LP had reneged on its offer to process the gas. That forced Pyr to find alternative methods to get its share to market, even as it took Samson to court.

Dennis R. Neill, senior vice president of privately held Samson, said Wednesday such conflicts would disappear if shareholders accept the Samson bid.

While Samson normally does not comment on its production and properties, he said the Pyr deal represented an effort to acquire other properties or interests in areas it operates in. Neill added that Pyr does not have the resources to effectively exploit the Jefferson County potentials.

"It's really a property acquisition," he said of the deal. "It's really no different than our going into an auction and buying additional interest in a property that we may operate."

Samson made its first takeover overture to Pyr's board on Jan. 26, its $1.23-per-share offer a 29-percent premium above the stock's 94-cent trading level. Samson revised its offer at Pyr's request on Feb. 21, promising the same price just for its Jefferson County properties.

When the Pyr board failed to follow through on those negotiations, Samson took its offer public in March even as it lowered the asking price to $1.21. In a letter to the Pyr board, Samson Executive Vice President C. Philip Tholen pinned the reduction on several factors:

* The "excessive level" of Pyr's overhead. Neill reiterated that problem Wednesday.

* The "unnecessary incremental fees and expenses" in its sales process.

* Increased stock options Pyr allowed as a potential anti- takeover device.

* The $775,000 sale of Pyr's Ryckman Creek properties, which Tholen said was substantially below the value Samson used in its initial offer.

Monday's deal raises the Samson offer to $1.30 a share. Pyr has 37.99 million shares outstanding.

Its stock price opened Wednesday up 8 cents and gradually added four more pennies to settle at $1.24. Volume totaled 1.14 million shares - almost 10 times its daily average.

Privately held Samson now intends to extend its original tender offer, which was scheduled to expire April 24, as the firms negotiate a definitive agreement.

Samson claims to be one of the top 20 independent exploration and production companies in the nation, with operations across 28 geologic provinces in 16 states, Canada and the Gulf of Mexico. Its international and offshore divisions in Houston have pursued ventures from Latin America and Australia to Southeast Asia and the North Sea, leading to establishing an office in Aberdeen, Scotland.

Pyr, which has five employees, recorded a 33-percent jump in profits for the six months ended Feb. 28, to $841,000, or 2 cents per share. Total oil and gas revenue climbed 22 percent to $4.98 million.

For the fiscal second quarter, Pyr's net income surged 161.7 percent to $458,000, or 1 cent per share, while its revenue rose 14 percent to $2.36 million.

Pyr sold 504.4 million cubic feet of natural gas over the six- month period at an average $6.21 per thousand cubic feet, a price 24- percent below year-ago levels. It also sold 305,147 barrels of oil at an average of $55.01 a barrel, the price down 9 percent from the prior year.

Besides Jefferson County, the Denver company has operations in Wyoming, North Dakota and the Gulf Coast. At Feb. 28, Pyr had cash of $5.18 million, liabilities of $1.48 million, total assets of $28.86 million and stockholders' equity of $19.49 million.

Current production at April 5 totaled 5 million cubic feet of natural gas per day.