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For Immediate Release
Contacts: Roger Holliday or
Susan Landreneau
Marathon Oil Company
(713) 296 - 3915
Paul M. Rady
Pennaco Energy, Inc
(303) 629 - 6700
Glen C. Warren, Jr.
Pennaco Energy, Inc.
(800) 672 - 9111
Marathon Oil Company to Acquire Pennaco Energy
Houston and Denver, December 22, 2000 -- Marathon Oil Company, part of the USX-
Marathon Group (NYSE: MRO), a unit of USX Corporation; and Pennaco Energy, Inc.
(AMEX: PN), announced today that they have signed a definitive merger agreement
under which Marathon will acquire for cash all the outstanding common shares of
Pennaco for $19.00 a share in a transaction valued at approximately $500
million, including net debt of $54 million. The Boards of Directors of both
companies approved the agreement. Lehman Brothers acted as financial advisor to
Pennaco in connection with the transaction.
In accordance with the merger agreement, Marathon expects to commence a cash
tender offer on or about January 8, 2001 for 100 percent, but not less than a
majority, of the outstanding Pennaco shares on a fully diluted basis. If a
majority of the outstanding shares are purchased in the tender offer, any
remaining Pennaco shares will be exchanged for cash in the amount of $19.00 per
share in a merger of Pennaco and Marathon's acquisition subsidiary. The
transaction is subject to customary conditions.
Headquartered in Denver, Pennaco was founded in 1998 and is entirely focused on
the production of coal bed methane gas (CBM) from the Powder River Basin,
located in northern Wyoming and southern Montana. The company is one of the
largest leaseholders in this play with over 400,000 net acres and current net
production of over 50 million cubic feet of natural gas per day. Net proven
reserves are estimated at approximately 200 billion cubic feet, with over 800
billion cubic feet of upside potential. Marathon estimates that the ultimate
acquisition and development costs of the proven, plus probable reserve base will
be around $4.50 per barrel of oil equivalent.
"Much of the growing global demand for energy will be met by natural gas, and
this is particularly the case for the United States where growth in electric
power generation is a prime driver," said Marathon President, Clarence Cazalot.
"The North American gas market is a core area for Marathon, and this acquisition
will enhance our already strong presence. Its assets will provide a significant
new reserve base that we can develop and deliver quickly to the marketplace."
Cazalot added: "Pennaco is a well run, highly regarded company with an
entrepreneurial spirit and is a great strategic fit with our growing North
American gas business. The shallow, more rapidly drilled CBM wells will
complement our focus in Oklahoma on deeper, higher productivity wells and result
in a more balanced portfolio of growth opportunities."
Paul M. Rady, Chairman, President and Chief Executive Officer of Pennaco stated,
"Marathon's tender offer reflects the proven and potential value of Pennaco.
Over the past two and one-half years Pennaco's management team and employees
have made outstanding progress in building and developing our position in the
Powder River Basin coal bed methane play. We are very proud of our company's
accomplishments and believe that it is Pennaco's growth potential that has
attracted an outstanding company like Marathon to our organization."
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Marathon Oil Company is one of the largest fully integrated oil firms in North
America. It is engaged in the worldwide exploration and production of crude oil
and natural gas and through Marathon Ashland Petroleum LLC, refines, markets and
transports petroleum products in the United States.
# # #
This press release is neither an offer to purchase nor a solicitation of an
offer to sell securities. The tender offer will be made only through an Offer
to Purchase and related Letter of Transmittal. Investors and security holders
are strongly advised to read both the tender offer statement and the
solicitation/recommendation statement regarding the tender offer referred to in
this press release, when they become available, because they will contain
important information. The tender offer statement will be filed by USX
Corporation, and Marathon Oil Company with the Securities and Exchange
Commission (SEC), and the solicitation/recommendation statement will be filed by
Pennaco Energy, Inc. with the SEC. Investors and security holders may obtain a
free copy of these statements (when available) and other documents filed by USX
Corporation, Marathon Oil Company and Pennaco Energy, Inc. at the SEC's website
www.sec.gov. The tender offer statement and related materials may by obtained
for free by directing such requests to USX Investor Relations at (212) 826-8418.
The solicitation/recommendation statement and such other documents may be
obtained for free by directing such requests to Pennaco Energy, Inc. at 1050
17th Street, suite 700, Denver, Colorado 80265, telephone: (303) 629-6700.
This release contains forward-looking statements with respect to completion of
the acquisition, estimated proven reserves, potential additional reserves and
the presently expected development costs. This forward-looking information is
based on certain assumptions, including, among others tender by Pennaco
shareholders, presently known physical data concerning size and character of
reservoirs, economic recoverability, future drilling success, production
experience, industry economic conditions (such as supply and demand), levels of
company cash flow from operations and operating conditions. This forward
looking information may prove to be inaccurate and actual results may differ
significantly from those presently anticipated. In accordance with "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, USX
has included in its Annual Report Form 10-K for the year ended December 31,
1999, cautionary language identifying other important factors, though not
necessarily these such factors, that could cause future outcomes to differ from
those set forth in forward-looking statements.
