US oil firm aims for big league

CALGARY - ConocoPhillips has agreed to buy US natural-gas producer Burlington Resources for US$35.6 billion ($50.85 billion) in cash and stock as chairman James Mulva seeks to bolster reserves and rival the world's largest oil companies.

ConocoPhillips, the third-biggest US oil and gas producer, would pay US$46.50 in cash and 0.7214 shares for each Burlington share, the company said yesterday. That's US$92 a share based on the price of ConocoPhillips stock on December 9, before reports of the merger. The takeover is the industry's biggest since Chevron agreed to buy Texaco in 2001.

Mulva, 59, is using acquisitions to catch up with Chevron, the No 2 US oil company, as oil and gas fields become harder to find and more expensive to tap. ConocoPhillips pumped more from reserves last year than it replaced through exploration.

"They want to get closer to Chevron," said Mark Zvonkovic, a partner who oversees energy mergers at the New York law firm Akin Gump.

"Acquiring Burlington would bring them closer to the super majors," he said, referring to companies such as Exxon Mobil, the world's biggest publicly traded oil company, and BP, the second largest.

Soaring energy prices are spurring acquisitions, according to Kurt Wulff, an analyst with McDep Associates in Needham, Massachusetts. US natural gas climbed to a record last week and crude oil reached an all-time high in August. ConocoPhillips was buying Burlington "out of optimism about the price of natural gas", said Wulff, who owns shares of both.

US energy companies have agreed this year to spend more than US$197 billion on acquisitions. That's double what they spent in 2004 and the most since 1999, when US$202 billion in mergers were announced.

Burlington, the biggest US energy producer that doesn't have refining or chemicals, would boost ConocoPhillips US gas reserves, excluding Alaska, by 88 per cent to 200 billion cubic metres, according to company filings.

A merger would increase ConocoPhillips US gas output by 77 per cent, adding to holdings in the San Juan, Anadarko and Wind River basins from New Mexico to Wyoming.

A combined ConocoPhillips and Burlington, both of Houston, would be the second-largest US gas producer behind London-based BP. ConocoPhillips is sixth at present, and Burlington Resources is 12th.

ConocoPhillips last year bought 7.6 per cent of Lukoil, Russia's largest oil producer, for US$2 billion. Mulva has raised the stake to 14.8 per cent and plans to acquire 20 per cent.

- BLOOMBERG