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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
MONDAY, JANUARY 26, 1998
UNION PACIFIC RESOURCES ANNOUNCES
ACQUISITION AGREEMENT FOR
NORCEN ENERGY
US$2.6 BILLION TRANSACTION WILL GIVE UPR MAJOR POSITIONS IN CANADA AND
LATIN AMERICA AND SIGNIFICANT EXPANSION IN THE GULF OF MEXICO
NORANDA, OWNER OF 49.5 PERCENT OF NORCEN STOCK, SIGNS IRREVOCABLE
COMMITMENT TO TENDER NORCEN INTEREST TO UPR
FORT WORTH, Texas -- Union Pacific Resources Group Inc. (NYSE-UPR) today
announced that its Board and the Board of Norcen Energy Resources Limited
(Norcen) have unanimously approved the acquisition of Norcen by UPR. The US$2.6
billion all cash transaction will increase UPR's estimated 1998 revenues to
US$2.7 billion from US$1.9 billion. UPR is offering C$19.80 per share
(US$13.65) for all outstanding shares of Norcen stock which represents a 29
percent premium over Norcen's closing price on January 23, 1998 of C$15.30 per
share. UPR will also assume Norcen's outstanding net debt of approximately
US$900 million, giving the overall transaction a US$3.5 billion value. Based on
consensus estimates, this transaction is accretive to UPR's 1998 discretionary
cash flow per share by 25-30 percent and is approximately 60-70 percent
dilutive to 1998 earnings per share based on purchase accounting adjustments.
UPR expects to eliminate this earnings dilution within three years.
The transaction will involve a cash tender offer for all Norcen shares at
C$19.80 per share. A prominent feature of the transaction is the irrevocable
commitment by Noranda to sell its 49.5 percent interest in Norcen to UPR in the
tender offer, thus assuring UPR the right to obtain effective control of
Norcen.
"With UPR's leadership position in the United States and Norcen's strong
position in Western Canada and Latin America, this combination will create a
well balanced North American company. The assets are diversified and there is
substantial reserve and production upside which will generate significant,
long-term value for our shareholders," said Jack L. Messman, UPR's Chairman and
CEO. "These two companies form a North American mega-independent with quality
opportunities in Latin America. UPR anticipates few changes in operating
personnel or office locations. Canadian operations will remain headquartered in
Calgary and Norcen's Gulf of Mexico operations offers UPR the opportunity to
create
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a presence in Houston. Norcen's Guatemala operations will also stay in place.
Our similar corporate cultures will create energy and enthusiasm to pursue the
many opportunities we see ahead. Grant Billing and his management team have
done an outstanding job in transforming Norcen into a highly focused and well
run company poised for substantial growth. The Norcen team will be a welcome
addition to UPR."
Based on 1997 year-end figures for UPR and UPR's estimates for Norcen's
proved reserves of approximately 550 million barrels of oil on an equivalent
basis (MMBOE), the new enterprise will have proved reserves in excess of 1.23
billion barrels of oil on an equivalent basis (where one barrel of oil is
equivalent to six thousand cubic feet (MCF) of gas), an 80 percent increase
over UPR's proved reserves on a stand-alone basis. The reserve mix of the
combined company will be 57 percent natural gas and 43 percent oil and natural
gas liquids. Based on fourth quarter 1997 rates, the combined company's daily
production would have been in excess of 436 thousand barrels of oil equivalent
(MBOE), which represents a 63 percent increase over UPR's daily fourth quarter
production of 268 MBOE. Norcen's reserve to production ratio (R/P) of 9.9 years
will increase UPR's R/P from 6.8 to 7.9 years on a combined basis.
UPR estimates it is paying approximately US$5.63 per barrel of oil
equivalent for Norcen's proved reserves. This number is derived from an
acquisition cost for proved reserves of US$3.10 billion, based on the total
cost of US$3.5 billion less approximately US$400 million for the value of
undeveloped land and other assets.
"This acquisition gives UPR new core areas in Canada and Latin America
plus a significant strategic expansion in the Gulf of Mexico including the deep
water," said George Lindahl III, UPR's President and COO. "While we currently
have a presence in Canada and the Gulf of Mexico, this acquisition will make us
a significant player in these regions."
Norcen's properties are located in four major areas which include Western
Canada, the Gulf of Mexico, Venezuela and Guatemala. In addition, Norcen owns
producing properties in Argentina and offshore Australia. Norcen's proved
reserves and production in these areas, on a percentage basis, are as follows:
PROVED
RESERVES (%) PRODUCTION (%)
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WESTERN CANADA 62 60
GULF OF MEXICO 11 14
GUATEMALA 12 12
VENEZUELA 13 11
OTHER 2 3
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"Norcen's properties fit well with our North American drillsite strategy
and create new core areas including Latin America. We are excited about our
entry into Latin America," Messman said. "The Norcen properties possess the
high ownership percentage and high level of operatorship which are key elements
of our business model. Norcen's properties in Canada, Venezuela and Guatemala
also include substantial production volumes and substantial growth potential.
Norcen also has a net undeveloped land position in excess of five million acres
which we find very attractive."
Both companies have properties in the prolific Louisiana shelf portion of
the Gulf of Mexico and are expanding in the deep water Gulf. UPR is beginning
development of its twenty block Mississippi Canyon Gomez discovery, and Norcen
is evaluating the Boomvang discovery involving five blocks in the East Breaks
area. Further, Norcen is drilling on the five block Betelguese prospect in the
Mississippi Canyon area. Combined, the two companies will have an interest in
37 tracts in the deep water, two deep water discoveries and commitments for
three deep water drilling rigs.
Lindahl said, "Norcen's properties are very attractive to us. They offer
significant low risk drilling inventory and high impact exploration potential
in the deep water Gulf of Mexico, Canada, Venezuela and Guatemala. It is a
quality portfolio of drillsite opportunities."
UPR plans to finance the all-cash transaction with a fully committed bank
facility underwritten by Chase Manhattan and Bank of Montreal. After consulting
with the ratings agencies, the Company will begin a deleveraging program
targeting a debt structure that will maintain no lower than a BBB+/Baa1 credit
rating. The program will include asset divestitures and, possibly, the issuance
of some equity.
UPR expects to initiate the tender offer within the next 5-7 business
days. The tender period will last thirty days unless extended by UPR and is
subject to normal regulatory approvals.
Nesbitt Burns and Salomon Smith Barney provided financial advisory
services to UPR in connection with the acquisition and will act as
dealer-managers in the tender offer.
Union Pacific Resources is one of the nation's largest domestic
independent oil and gas exploration and production companies. Based in Fort
Worth, Texas, UPR has been the #1 domestic driller for the past 6 years.
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THIS PRESS RELEASE, OTHER THAN HISTORICAL FINANCIAL
INFORMATION, CONTAINS FORWARD LOOKING STATEMENTS REGARDING
DILUTION, CASH FLOW, PLANNED DRILLING ACTIVITY, ASSET
DIVESTITURES, EQUITY ISSUANCES, EXPECTED PRODUCTION EFFORTS
AND VOLUMES THAT ARE SUBJECT TO A NUMBER OF RISKS AND
UNCERTAINTIES WHICH ARE DESCRIBED IN THE COMPANY'S SEC
REPORTS, INCLUDING THE REPORT ON FORM 10-Q FOR THE QUARTER
ENDED SEPTEMBER 30, 1997. ACTUAL RESULTS MAY VARY MATERIALLY.
Media Contact: Analyst Contact:
Pat Doyle Mike Liebschwager
Director, Public Affairs Director, Investor Relations
817-877-6527 817-877-6531
Internet:www.upr.com
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