Questar Corp., parent company of Mountain Fuel Supply, said Tuesday its subsidiary, Universal Resources Corp., has agreed to acquire oil and gas properties from Union Pacific Resources Corp. for $94.5 million.
"(It's) the largest and most significant reserve acquisition in company history and will accelerate our development as one of the nation's leading independent oil and gas producers," said Questar chairman R.D. Cash.Universal Resources acquired the properties through an alliance with Union Pacific Resources, a subsidiary of Union Pacific Corp.
Union Pacific announced Tuesday that it had agreed to acquire Amax Oil & Gas for $819 million. After that deal is closed, expected in 30 days, Questar said Universal Resources will acquire all of what is now Amax's Northern Division.
Questar and Union Pacific are both Utah corporations but only Questar is based in Salt Lake City. Union Pacific is based in Bethlehem, Pa.
Most of the Amax property is in Texas where Union Pacific Resources already has large energy holdings.
Amax is a subsidiary of Cyprus Amax Minerals Co., a company formed by the recent merger of Cyprus Minerals Co. and Amax Inc. A spokesman for Union Pacific said all of Cyprus Amax's oil and gas assets are being sold in the transaction.
He said the properties to be retained by Union Pacific are predominately "long-lived" natural-gas producing, gathering and processing assets in Texas and Louisiana. They include interests in 14 major fields and encompass more than 600,000 acres and approximately 2,000 producing wells.
The assets also include interests in over 550 miles of gathering lines and three gas processing plants, which the spokesman said constitute a "significant" portion of the value. Union Pacific Resources will hold a majority working interest in and operate essentially all of the acquired properties.
The Questar acquisition includes properties and facilities in Oklahoma, the Texas Panhandle, northwestern New Mexico and Colo-rado. A Questar spokesman said they have proven reserves of 92 billion cubic feet of gas and oil.
He said the purchase price was based on those proven reserves, which were audited by an independent reservoir engineering firm, and an estimated finding cost of 87 cents per thousand cubic feet.
Gary L. Nordloh, president of Questar's exploration and production subsidiaries, said the AOG purchase, combined with another $22.6 million acquisition in January, would add 35 percent to Questar's non-regulated reserves.
With the AOG acquisition, Questar bought an interest in some 1,000 wells, of which 539 are company operated, as well as undeveloped acreage and facilities.
Questar's Universal Resources also obtained a gas-gathering system and three gas-processing plants.
Questar said the purchase price will be "subject to normal due diligence" and noted that final valuation and reserve quantities will be available after closing, expected by early April.
Nordloh said many of the AOG Oklahoma and Texas Panhandle properties lie near or within current activity areas, which can be combined with Universal's Oklahoma operation. The San Juan Basin properties in New Mexico and Colorado represent a new operating area, which will be combined with other Questar oil and gas assets to form Questar Energy, a new division of Universal Resources.