DALLAS -- Mesa Inc. agreed yesterday to buy Parker & Parsley Petroleum Co. for $1.9 billion in stock and assumed debt, adding oil reserves to its natural gas holdings in a bid to recapture its lost prominence in the U.S. energy industry.
The $40.25-a-share agreement, 38 percent more than Parker & Parsley's closing price Friday, will form one of the largest U.S. exploration and production companies. Mesa will assume about $500 million of Parker & Parsley debt.
Mesa's planned purchase of a company whose market value is four times its own recalls former Chairman T. Boone Pickens' practice in the 1980s of using Mesa to pursue hostile takeover bids for larger rivals. Pickens gave up control last year when Mesa sold a stake to financier Richard Rainwater to refinance its $1 billion of debt taken on during that period.
"It's an opportunity to move forward with a bigger machine," Pickens, who remains a Mesa director, said of the Parker & Parsley purchase.
The acquisition could mark the start of a consolidation wave among midsize oil and gas producers, analysts said, as petroleum prices declined this year.
"We're going to see more consolidation because operating margins have narrowed with the lower prices," said John Selser, an analyst with Howard, Weil, Labouisse, Fredrichs Inc. in New Orleans.
Mesa's acquisitions, and the debt amassed to pay for them, left it a shadow of the company it was a decade earlier. Since then, Mesa has attempted to bolster reserves and improve its access to capital.
The combined company, to be called Pioneer Natural Resources Co., will have 3.7 trillion cubic feet of reserves of natural gas equivalent. The reserves include Mesa's prized holdings in the Hugoton gas field of western Kansas, considered the richest in the world.
Pioneer will produce more than 64,000 barrels of oil and 459 million cubic feet of natural gas daily from fields in Texas, the Gulf of Mexico and Argentina.
Under the agreement, shareholders of Irving, Texas-based Mesa will receive one share of the new company for every seven shares they own. Holders of Parker & Parsley, based in Midland, Texas, will get one Pioneer share for each of their shares.
Mesa's current shareholders will control 43 percent of the new company, while Parker & Parsley investors will get 57 percent, assuming all preferred shares are converted into common.
"Mesa is having to give up a significant amount more of their equity in this transaction," said Hal Miller, a consultant with Cornerstone Ventures in Houston. "That's the price for the debt they are carrying along."
Mesa shares fell 50 cents to $5.25, and Parker & Parsley shares rose $2 to $31.88.
Mesa can call off the agreement if its shares fall below 5.
The acquisition is part of a strategy developed by Jon Brumley, who replaced Pickens as chairman in August. Under Brumley, 58, Mesa agreed to buy Greenhill Petroleum Corp. for $270 million and the natural gas liquids business of Mapco Inc. for $66 million.
Mesa, however, lacked the capital to expand more. In February, it filed a $500 million shelf registration that's now on hold.
Pub Date: 4/08/97