Houston Exploration Board Authorizes Exploration of Alternatives to Further Enhance Shareholder Value
27 Juin 2006 - 12:45AM
PR Newswire (US)
Determines JANA's Unsolicited Acquisition Proposal Not in Best
Interest of Shareholders HOUSTON, June 26 /PRNewswire-FirstCall/ --
The Houston Exploration Company (NYSE:THX) today announced that its
Board of Directors has engaged Lehman Brothers Inc. to assist the
Company in exploring a broad range of strategic alternatives to
further enhance shareholder value. These alternatives may
complement or replace the continued execution of the Company's
previously announced business plan and include, but are not limited
to, a recapitalization of the Company either through additional
share repurchases or a special dividend; operating partnerships
and/or strategic alliances; and the sale or merger of Houston
Exploration. Houston Exploration emphasized that it is unable to
predict if this review of alternatives will result in any
transaction or otherwise modify or replace the Company's current
business plan. The Company does not expect to make further public
comments with respect to this announcement until after the Board of
Directors has completed its analysis of strategic alternatives and
approved a definitive course of action. Houston Exploration issued
the following statement: Since announcing our restructuring plan in
the fall of 2005, decisive actions have been taken to improve the
Company's financial and operating performance. We have completed
the sale of our offshore assets and are now focused onshore where
the Company has a proven track record of more stable and
predictable production and reserve growth -- in fact, we currently
estimate onshore production to grow by approximately 9 percent this
year and 19 percent in 2007. With the Company's portfolio
successfully realigned, the Board believes that now is an
appropriate time to explore additional strategic alternatives that
may be available to further enhance shareholder value. Houston
Exploration also announced that its Board of Directors, after
careful examination, unanimously determined that the unsolicited
acquisition proposal from JANA Partners is not in the best interest
of Houston Exploration shareholders. Following is a letter sent
today from William G. Hargett, Chairman, President and Chief
Executive Officer of Houston Exploration, to Barry Rosenstein,
Managing Partner of JANA Partners: June 26, 2006 Via Facsimile and
Overnight Delivery Barry Rosenstein Managing Partner JANA Partners
LLC 201 Post Street, Suite 1000 San Francisco, CA 94108 Dear Mr.
Rosenstein: Houston Exploration's Board of Directors, with the
assistance of its financial and legal advisors, has reviewed and
thoroughly considered the proposal outlined in your June 12, 2006
letter. The Board has unanimously determined that your proposal is
not in the best interest of Houston Exploration shareholders. We
believe that your proposal undervalues Houston Exploration's
portfolio of assets and opportunities. As you know, in November
2005 and well before JANA disclosed its holdings in Houston
Exploration, we announced a major restructuring plan designed to
improve Houston Exploration's financial and operating performance.
Pursuant to that plan, we have successfully completed the sale of
our offshore assets and have begun executing a share repurchase
program. We have been disciplined in our approach and believe that
Houston Exploration is well-positioned for continued value
creation: * We are focused onshore where we have a proven track
record of more stable and predictable production and reserve
growth, and where we expect to benefit from a related reduction in
finding and development costs; * We have a deep inventory of
multi-year onshore drilling opportunities. Our onshore assets are
strategically located across approximately 709,000 net acres where
we currently have an inventory of about 7,500 prospective drilling
locations. This includes 106,000 net acres and 3,300 drilling
locations in the Uinta Basin, where the Company is actively
developing a potential recoverable gas resource of over 800 Bcfe,
net. A number of other companies have realized excellent drilling
results and production growth in this area, and we believe that
Houston Exploration's Uinta Basin properties have similar growth
potential. Our Uinta assets are complemented by 460,000 net acres
and 3,300 drilling locations across our remaining Rocky Mountain
position, as well as 143,000 net acres and a drilling inventory of
900 locations in our remaining areas; * We believe that with our
current asset portfolio we can deliver substantial increases to
production in 2006 and 2007. Our current net production rate is
over 200 MMcfe per day, and as previously announced, we plan to
exit 2006 at a rate of 225 MMcfe per day with our existing drilling
program of more than 400 wells. In 2007, we expect to step-up our
drilling activity to over 550 wells, which we believe will result
in an average production rate of 245 MMcfe per day, based on a
capital expenditure program of approximately $490 million; and * We
are executing a share repurchase program, under which we currently
intend to expend up to $200 million. This is consistent with our
commitment to maintain a strong balance sheet and provides the
Company with the financial flexibility necessary to pursue
additional strategies to enhance shareholder value. While we have
confidence in the Company's plan, the Houston Exploration Board is,
and has always been, committed to pursuing the path that provides
the greatest value to Houston Exploration shareholders. Consistent
with this commitment, our Board has engaged Lehman Brothers Inc. to
assist the Company in exploring strategic alternatives to further
enhance shareholder value. These alternatives may complement or
replace the continued execution of the Company's business plan and
include, but are not limited to, a recapitalization of the Company
either through additional share repurchases or a special dividend;
operating partnerships and/or strategic alliances; and the sale or
merger of Houston Exploration. In sum, our Board and senior
leadership team continue to be focused on fully realizing the value
of Houston Exploration. Thank you for your interest in the Company.
Sincerely, /s/ William G. Hargett William G. Hargett The Houston
Exploration Company Chairman, President and Chief Executive Officer
Lehman Brothers Inc. is serving as financial advisor to Houston
Exploration, and Akin Gump Strauss Hauer & Feld LLP and Morris,
Nichols, Arsht & Tunnell LLP are legal advisors. About The
Houston Exploration Company The Houston Exploration Company is an
independent natural gas and crude oil producer engaged in the
development, exploitation, exploration and acquisition of natural
gas and crude oil properties. The Company's operations are focused
in South Texas, the Arkoma Basin, East Texas, and the Rocky
Mountains. For more information, visit the Company's Web site at
http://www.houstonexploration.com/ . Forward-looking Statements
This news release and oral statements regarding the subjects of
this release contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, Section 21E of the
Securities Exchange Act of 1934 and the Private Securities
Litigation Reform Act. All statements other than statements of
historical fact included in this press release are forward- looking
statements and reflect the Company's current expectations and are
based on current available information and numerous assumptions.
Important factors that could cause actual results to materially
differ from the Company's current expectations include, among
others, the terms, timing and impact of any strategic alternative,
if any, ultimately selected by the Board, price volatility, the
business outlook, the impact of onshore asset concentration, the
risks associated with the consummation and successful integration
of acquisitions, the impact of hurricanes, the risk of future
writedowns, the impact of hedging activities, the accuracy of
estimates of reserves and production rates, production and spending
requirements, the inability to meet substantial capital
requirements, the market and other factors for stock repurchases,
the constraints imposed by the Company's outstanding indebtedness,
the relatively short production life of the Company's reserves,
reserve replacement risks, drilling risks and results, the
competitive nature of the industry, and other risks and factors
inherent in the exploration for and production of natural gas and
crude oil discussed in the Company's filings with the Securities
and Exchange Commission, including the Company's annual report on
Form 10-K for the year ended December 31, 2005. The Company assumes
no responsibility to update any of the information referenced in
this news release. Contacts Melissa R. Aurelio The Houston
Exploration Company (713) 830-6887 Barrett Golden / Eric Brielmann
Joele Frank, Wilkinson Brimmer Katcher (212) 355-4449 DATASOURCE:
The Houston Exploration Company CONTACT: Melissa R. Aurelio of The
Houston Exploration Company, +1-713-830-6887; or Barrett Golden, or
Eric Brielmann, both of Joele Frank, Wilkinson Brimmer Katcher,
+1-212-355-4449, for The Houston Exploration Company Web site:
http://www.houstonexploration.com/
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