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EXHIBIT 99.1
[SEAGULL ENERGY CORPORATION LOGO]
[OCEAN ENERGY LOGO]
SEAGULL ENERGY CORPORATION
FOR IMMEDIATE RELEASE
November 25, 1998
CONTACTS: Seagull Energy Corporation Ocean Energy, Inc.
Alan Payne (713) 951-4842 Michael O. Aldridge (713) 420-1142
OCEAN ENERGY, INC. AND SEAGULL ENERGY CORPORATION TO MERGE
CREATING $3.6 BILLION OIL AND GAS COMPANY
NEW COMPANY TO HAVE ENHANCED ACCESS TO CAPITAL TO EXPLOIT
SIGNIFICANT GROWTH OPPORTUNITIES
o Tenth largest independent exploration and production company in the U.S.
with a current equity market capitalization of $1.8 billion, enterprise
value of $3.6 billion, and total proved reserves of approximately 500
million barrels of oil
o Shareholder-aligned management team with significant equity stake in the
new company
o Significant cost savings opportunities through overlapping operations and
corporate overhead consolidation - savings in excess of $45 million
annually
o Large, high quality portfolio of assets with a balanced mix of oil vs. gas,
domestic vs. international and exploration vs. exploitation
o Cash flow accretive to both shareholder groups, after taking into account
cost savings
o Reduced capital expenditures of $500 to $600 million with planned
dispositions of at least $100 million
HOUSTON - Ocean Energy, Inc. (NYSE: OEI) and Seagull Energy Corporation
(NYSE: SGO) today announced that they have signed a definitive agreement to
merge in a tax-free, stock-for-stock transaction creating the tenth largest
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independent U.S. oil and gas company based on a pro forma total market equity
capitalization of approximately $1.8 billion based on yesterday's closing price
for Seagull's shares. The combined company will be named Ocean Energy, Inc., and
will be headquartered in Houston. The combined company will have a large, high
quality portfolio of assets with a balanced mix of oil vs. gas, domestic vs.
international, and exploration vs. exploitation opportunities. The merger
creates a company with critical mass, enhanced access to capital and a strong,
proven management team to exploit significant exploration and development
opportunities. The combined company's management team expects production and
cash flow growth from the combination and anticipates generating cost savings in
excess of $45 million annually.
The Board of Directors of each company approved the transaction and recommends
the merger. In the merger, Ocean Energy will merge with and into Seagull, which
will be renamed Ocean Energy, Inc. Each old Ocean Energy shareholder will
receive one newly issued share of Seagull common stock for each Ocean Energy
common share, and all Seagull shares will remain outstanding. As a result, new
Ocean Energy will have approximately 165 million shares outstanding, of which
approximately 61.5% will be owned by Ocean Energy shareholders and 38.5% will be
owned by Seagull shareholders. The merger will be accounted for as a purchase
transaction and is expected to close by the end of March 1999.
Core operating areas will be organized into three business units: Onshore North
America, Gulf of Mexico and International - creating great potential for cost
savings through consolidation of operations and overhead, asset rationalizations
and sales of non-core assets. Specifically, the combined company intends to cut
costs in excess of $45 million by eliminating duplicate corporate headquarters
and staff. New Ocean Energy will also high-grade the combined exploration
programs and rationalize the combined portfolio of development and exploitation
projects. New Ocean Energy also intends to manage its debt and raise additional
growth capital through the disposition of non-core domestic and international
assets including at least $100 million of asset sales in 1999.
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James C. Flores, Ocean Energy's current President and C.E.O., will become
Chairman of the Board of the combined company. James T. Hackett, Seagull's
current President and C.E.O., will be President and Chief Executive Officer of
the combined company. Barry J. Galt and John B. Brock, the respective Chairmen
of Seagull and Ocean Energy, will serve on the Board of Directors of the
combined company. Management will own approximately 10.5% of the common stock of
the combined company, including approximately 6.6% to be beneficially owned by
James C. Flores. "The combination between Ocean Energy and Seagull will add
tremendous value to the combined shareholder base through financial strength,
cost efficiencies, expanded opportunity inventory -- both exploration and
exploitation," said Mr. Flores. "In addition, the combination accelerates
Ocean's strategy of becoming more weighted toward natural gas in terms of
reserves and production, as well as combines a dynamic management team that is
completely aligned with shareholders."
"Ocean Energy's demonstrated ability to develop significant exploration and
exploitation inventory, our ability to manage discretionary cash flow and the
opportunities we see for significant cost savings make this a very compelling
transaction," said Mr. Hackett. "With the combined company's size, scale and
scope, we will be better positioned, than either Ocean Energy or Seagull was on
a stand-alone basis, to weather and leverage commodity cycles and to be
opportunistic regardless of the commodity environment."
On a pro forma basis, current daily production for the combined company would be
approximately 80 thousand barrels of oil and 622 million cubic feet of gas, for
a total of 184 thousand barrels of oil equivalent. It is estimated that the
combined company will have proved reserves of approximately 500 million barrels
of oil equivalent, with approximately 57% natural gas and 43% oil. Approximately
68% of proved reserves are located in North America with the remaining 32%
located internationally. The combined company will also have in excess of 22
million net undeveloped acres in 14 countries.
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Additionally, the new Ocean Energy management team intends to manage the
combined company's capital expenditure budget in order to improve the balance
sheet. The capital expenditure budget for the combined company is expected to be
approximately $500 to $600 million in 1999, fully funded by expected combined
operating cash flows and from the disposition of at least $100 million of
non-core domestic and international assets.
The Board of Directors will be comprised of eight individuals from the Ocean
Energy board and seven from the Seagull board, for a total of 15 board members.
Officers reporting to Mr. Hackett will include: James L. Dunlap, Vice Chairman;
William L. Transier, Executive Vice President and Chief Financial Officer;
Robert K. Reeves, Executive Vice President and General Counsel; Richard F.
Barnes, President, ENSTAR Natural Gas, as well as other operating heads. Mr.
Flores, Ocean's current chairman John B. Brock, Mr. Hackett, Seagull's current
Chairman Barry J. Galt, and The Prudential Insurance Company of America have
committed to vote in favor of the merger. As a result, the holders of
approximately 10% of each company's common shares have already agreed to support
the merger.
The transaction is subject to shareholder approvals, expiration of the
Hart-Scott-Rodino waiting period, certain regulatory approvals, and other
customary closing conditions.
Lehman Brothers and J.P. Morgan acted as financial advisors to Ocean Energy, and
Merrill Lynch & Co. and Warburg Dillon Read acted as financial advisors to
Seagull.
Certain statements in this news release regarding future expectations, potential
results of the business combination, plans for acquisitions, capital
expenditures, dispositions, and oil and gas exploration, development, production
and pricing may be regarded as "forward looking statements" within the meaning
of the Securities Litigation Reform Act. They are subject to various risks, such
as operating hazards, drilling risks, and the inherent uncertainties in
interpreting engineering data
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relating to underground accumulations of oil and gas, as well as other risks
discussed in detail in the companies' SEC filings, including the Annual Reports
on Form 10-K for the year ended December 31, 1997. Actual results may vary
materially.
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