Pogo to buy Unocal's entire assets in Canada for $1.8b

Unocal Corp yesterday said it agreed to sell virtually its entire Canadian oil and gas exploration and production portfolio to Pogo Producing Co. for $1.8 billion in cash.

The move is unrelated to Unocal's pending $16 billion-plus acquisition by Chevron Corp and comes after it had announced in early May that it would sell Northrock Resources.

Unocal said it would realise after-tax proceeds of $1.5 billion from the sale of Northrock Resources, a plan that was pending before the Chevron deal.

Though Pogo emphasised how the deal would boost reserves and add to earnings starting next year, at least one analyst suggested that the price paid for them may have been too high.

"We do not believe that these assets have the demonstrated reinvestment opportunities to justify the premium paid," Lehman analyst Thomas Driscoll said in a research note.

"The plus for Pogo is that the acquisition provides some clarity related to Pogo's strategic direction."

Record oil and gas prices over the past year have driven acquisition prices. Pogo, for example, is paying $16.77 per barrel of oil equivalent a 20 to 25 per cent premium to where the company trades now, Driscoll said.

The Pogo deal is expected to close in the third quarter, pending Canadian approvals.