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KKR closes in on Samson Investment

by Lisa Ward and Claire Poole | Published November 8, 2011 at 4:32 PM

Closing in on the final terms for a proposed leveraged buyout of privately held oil and gas explorer Samson Investment Co., New York buyout house Kohlberg Kravis Roberts & Co. LP is said to be offering a total deal value of about $6.25 billion, according to two sources.

Financing details are still being threshed out for the Tulsa, Okla., company and could change before a transaction is announced, possibly in the next few weeks, these sources said.

As of now KKR plans to contribute about 40% in equity, or about $2.5 billion, to fund the LBO. The $3.75 billion debt facility comprises about $1.5 billion senior secured loans and $2.25 billion of senior unsecured notes, these sources said. A $1.3 billion revolver also is included.

One source said KKR has decided not to purchase all of the company's assets, which may account for a deal price that's considerably lower than initially reported. It isn't clear which assets KKR would be taking. KKR did not immediately respond to a request for comment.

Jefferies & Co. was hired to run an auction several months ago. Korean National Oil Corp. bid on Samson, as did two independent oil and gas producers, one from the U.S. and one from Europe, another source said.

Last week Samson CEO Stacy Schusterman confirmed in a company memo that KKR was in exclusive talks for the company, according to media reports. The Wall Street Journal first reported on Nov. 2 that KKR and Samson were in discussions over a joint venture or outright sale.

Samson is based in Tulsa, though its international and offshore operations are in Houston, with other offices in Denver and Midland, Texas. According to its website, its U.S. operations are focused on onshore basins and in the Gulf of Mexico, while its midstream activities have expanded to include gas transportation, processing and storage.

The company's asset base is 85% natural gas. Over the past three years it has invested more than $4 billion in new drilling and oil and gas property acquisitions, tapping financing from a network of U.S. and foreign banks.

Samson is in most of the major oil and gas basins of the U.S., both onshore and offshore in the Gulf of Mexico, and owns infrastructure as well, which is valuable to oil and gas producers. It owns properties in the Anadarko Basin, Appalachian Basin/Marcellus Shale, Black Warrior Basin, East Texas & North Louisiana/Haynesville, GOM Deepwater, Green River Basin, Gulf Coast and Permian Basin, among others.

KKR is already in the Barnett of North Texas, in southeast Texas and Marcellus, so it's probably looking to expand into other shale areas such as the Permian, the Bakken and Granite Wash.

Samson, controlled by the Schusterman family, may also see it as a good time to sell, given the premiums being paid for shale properties and fears of increased capital gains tax rates, which the family would incur if it sold the company, another source told The Daily Deal in early October.

Samson co-founder Charles Schusterman died in 2000; his daughter, Stacy, has been running the company. Forbes estimates that Charles' widow, Lynn Schusterman, is worth $3 billion.

Charles Schusterman and his brother Dan started S&S Pipe and Supply Co. in 1961. Ten years later, Charles Schusterman created Samson Resources Corp. to hold the California oil and gas properties he bought from Amerada Hess Corp.

In the late 1980s Samson expanded into Canada, Russia and Venezuela but sold those properties between 2004 and 2008, including its Canadian assets to Canetic Resources Trust in 2006 for $800 million. Scotia Waterous and BMO Nesbitt Burns Inc. advised the company on that sale.

Samson has been fairly acquisitive over the past decade. In 2002, it picked up properties in South Texas, Louisiana, Wyoming and Colorado and in 2003 bought natural gas and oilfields in East Texas and Arkansas from Dominion Exploration & Production Inc. for $29.2 million and Louisiana and Gulf of Mexico explorer Contour Energy Co. for $146 million.

Samson's last major publicly known acquisition was its 2007 purchase of publicly traded PYR Energy Corp., which it bought for $1.30 per share, or $49.4 million. It took counsel from law firms Weil, Gotshal & Manges LLP and Hogan & Hartson LLP on that transaction.

Samson has also signed several joint venture agreements over the years. In 2004 it signed one with Aurora Energy Ltd. to explore for oil and gas in Michigan's Antrim Shale and in 2005 inked an agreement with Noble Energy Inc. to do the same in the Gulf of Mexico.

It also had a joint venture with Chevron Corp. to explore for oil in the deepwater Gulf of Mexico before the BP plc oil spill resulted in a moratorium on new drilling there.

-- David Carey contributed to this article.

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Tags: energy | Kohlberg Kravis Roberts & Co. LP | PE | Samson Investment Co.

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