Oil and gas producer Unocal Corporation has entered into an agreement to sell all of the outstanding stock of its wholly owned Canadian subsidiary, Northrock Resources, to Pogo Producing Company for $1.8 billion in cash.
Northrock represents the vast majority of Unocal’s Canadian oil and gas business. The assets make up just fewer than 7% of Unocal’s total worldwide hydrocarbon reserves but would increase Pogo’s reserves by 45%. The company said it expects to realize after-tax proceeds from the sale of approximately $1.5 billion.
Unocal added that it intends to add the net proceeds from the sale to its current cash and cash equivalents balance, which is estimated to be approximately $1.8 billion at the end of the second quarter 2005. The transaction, which is subject to customary Canadian regulatory approvals, is expected to close in the third quarter 2005.
The news of the divestment of Canadian assets comes at the same time that Unocal is negotiating with both US suitor Chevron and Chinese interested party CNOOC over a merger deal. Currently, Unocal is exploring the possibility of satisfying US regulatory issues in order to facilitate a deal with CNOOC. However, Chevron, the original interested party, still holds Unocal’s official approval at this time.