Monday, June 4, 2007

Loews in $4 billion deal for Dominion gas assets

Reuters

NEW YORK (Reuters) - Loews Corp. , a conglomerate, said on Monday it will buy gas exploration and production assets in three states from Dominion Resources Inc. for $4.025 billion in cash, betting on rising natural gas prices as it diversifies its revenue stream.

The main properties being acquired are located in the Permian Basin in Texas, the Black Warrior Basin in Alabama and the Antrim Shale in Michigan, with estimated reserves of about 2.5 trillion cubic feet of gas. The price equates to about $1.61 per thousand cubic feet, Loews said.

New York-based Loews, the majority owner of natural gas pipeline operator Boardwalk Pipeline Partners LP , plans to set up a new company for the acquired assets. It said it will also retain existing management, led by Timothy Parker, a Dominion senior vice president of exploration and production.

Natural gas "will be a fuel of choice for years to come (as) we move into a world that is worried about global warming and greenhouse gases," Loews Chief Executive James Tisch said on a conference call.

"We're seeing a reserve base in the United States that is, at best, staying flat, and we're seeing reduced importing of natural gas from Canada," he added. "If prices just stay where they are, we'll do very well with this investment."

Richmond, Virginia-based Dominion is also selling other U.S. gas and oil operations to XTO Energy Inc. for $2.5 billion as it focuses on its power business.

Tisch, whose billionaire family runs Loews, has been looking for ways to spend about $5.5 billion.

In an April 30 conference call, he had set a goal to "continue diversifying (the) very significant cash flow that is coming up to the parent."

Loews expects a third-quarter closing. It said it may obtain bank loans, though not sell public debt, at the subsidiary level to help fund the acquisition.

Loews' businesses include financial, tobacco, energy, hotel and watch-making companies. It said it owns 75 percent of Boardwalk, 51 percent of Diamond Offshore Drilling Inc. , 89 percent of insurer CNA Financial Corp. , and all of tobacco company Lorillard Inc., Loews Hotels and watchmaker Bulova Corp. CNA generates more than half of overall revenue.

Loews shares were up 79 cents, or 1.6 percent, to $51.81 in noon trading on the New York Stock Exchange. They began the year at $41.47.

(Additional reporting by Caroline Humer and Lisa Lee)

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