Petro-Lewis Corp. To Be Sold To New Orleans Firm For $440 Million
DENVER (AP) _ Petro-Lewis Corp., an oil-boom success until foundering prices pushed it to the brink of bankruptcy, will be sold to a New Orleans conglomerate for $440 million in cash.
Officials for Petro-Lewis and the purchaser, Freeport-McMoran Inc. of New Orleans, announced Thursday they had signed a letter of intent for the takeover.
Petro-Lewis employees and management would own 18 percent of the new company by either contributing cash or Petro-Lewis stock, according to the announcement.
Freeport-McMoran officials said most of Petro-Lewis’ 470 employees probably will keep their jobs, although some may be transferred to New Orleans.
As part of the deal, Freeport-McMoran also will buy the American Royalty Trust of Houston, which consists of the oil and gas assets of Petro-Lewis’ 45 income partnerships formed over 15 years with 180,000 investors. They were spun off in December 1984 as part of the settlement of a class-action lawsuit brought by investors. Petro-Lewis owns 20 percent of the group.
Joe Tice, spokesman for Freeport-McMoran, said his firm plans to form an independent company to own and operate the Petro-Lewis and American Royalty assets. The company, he said, probably will be located in New Orleans.
The sale may be the final chapter of what once had been one of Denver’s most promising oil and gas firms and one of Colorado’s few billion-dollar companies.
Started in May 1968 by Jerome A. Lewis, Petro-Lewis became the nation’s No. 1 seller of publicly offered oil and gas income funds. But falling oil prices reduced the value of its holdings and sharply cut revenues needed to repay a $600 million debt. Since oil prices took their tumble in 1984, the company has laid off three-fourths of its work force.
The signing of the letter of intent came as Petro-Lewis faced a Thursday deadline - already extended seven times - to exchange nine issues of new debt securities or confront possible liquidation under federal bankruptcy laws.
Freeport-McMoran’s diversified holdings include sulfur, agricultural products, oil and gas exploration and development, uranium extraction, gold, copper and other metals. In 1985, the company had net income of $111.5 million on revenues of $722.2 million.
As a result of the deal, Freeport-McMoran reportedly will pay as little as $4 a barrel for oil now selling for about $11 on the market.
″The purchase of these high-quality reserves comprising about 185 million barrels of oil equivalent will continue Freeport-McMoran’s growth strategy of acquiring long-lived natural resources,″ said James R. Moffett, the company’s chairman.
Alfred J. Humphries, an analyst with Hanifen Imhoff Inc. in Denver, said the combined petroleum reserves of the royalty trust and Petro-Lewis have a value exceeding $800 million, including 118 million barrels of oil worth $472 million and 645 million cubic feet of natural gas worth about $420 million.
Humphries added, however, that Petro-Lewis has a debt of $600 million and the royalty trust a debt of about $200 million.
Petro-Lewis chairman Jerome Lewis issued a statement through Freeport- McMoran on Thursday that said, ″We look forward to our association with Freeport-McMor an and of a transaction which provides the opportunity for cash values to our security holders during turbulent times.″