For Information
---------------
Mark A. Hellerstein
Robert T. Hanley
303-861-8140
FOR IMMEDIATE RELEASE
ST. MARY ANNOUNCES AGREEMENT TO ACQUIRE OIL AND GAS PROPERTIES
FROM FLYING J OIL & GAS AND BIG WEST OIL & GAS
DENVER, December 13, 2002 - St. Mary Land & Exploration Company (NYSE: SM)
today announced that through its wholly owned subsidiary Nance Petroleum
Corporation it had agreed to acquire oil and gas properties with an estimated 69
BCFE of proved reserves, 92% developed, from Flying J Oil & Gas Inc. and Big
West Oil & Gas Inc. in exchange for the issuance of a total of 3.4 million
restricted shares of St. Mary common stock. In addition, St. Mary has agreed to
make a non-recourse loan to Flying J and Big West of $72 million at Libor plus
2% for up to a 39-month period, which will be secured by a pledge of the shares
of St. Mary stock issued to Flying J and Big West. During the 39-month loan
period Flying J and Big West can elect to put their shares of St. Mary stock to
the Company for $72 million plus accrued interest on the loan, and St. Mary can
elect to call the shares for $98 million.
The number of St. Mary shares to be issued and the loan, put and call amounts
are subject to proportionate adjustments in the event of certain purchase price
adjustments that may occur as a result of due diligence matters. The acquisition
is expected to close January 29, 2003. McDonald Investments Inc. is St. Mary's
financial advisor in this transaction.
The properties to be acquired are located primarily in the Williston, Powder
River and Green River basins and currently produce an estimated 2,100 barrels of
oil and 8,200 Mcf of gas per day or 20,800 MCFE per day, which is equivalent to
15% of St. Mary's average daily production rate for the third quarter 2002. In
addition, the acquisition will include approximately 500,000 acres of
undeveloped oil and gas leases. For calendar year 2003, approximately 100% of
the estimated oil production is hedged at an average NYMEX price of $27.80 per
barrel, with a provision that eliminates the hedge on a month-to-month basis in
the event the average monthly NYMEX oil price is below $21.00 per barrel.
Approximately 70% of the 2003 natural gas production is hedged using a CIG basis
collar with a floor of $2.50 per MMBTU and a ceiling of $5.93 per MMBTU. The
Company intends to hedge 100% of estimated 2004 production prior to closing.
"The properties provide an ideal expansion opportunity for the Rockies region
where we have enjoyed a 91% success rate drilling operated wells since 1991. St.
Mary's Nance Petroleum Corporation is now the second largest operator of oil
properties in Montana. While considerable reserves will be added in the core
area of the Williston Basin, sizeable increases will also occur in the Powder
River and Green River basins. Although the deal structure has some complexity,
it can be viewed either as a stock transaction or as a cash acquisition for $72
million if the put option is exercised, both of which we believe are favorable.
The call feature allows us to manage our debt and equity levels. Should our
stock price increase significantly we have the ability to repurchase the shares
to minimize dilution that may occur with the conversion of our previously issued
5.75% Senior Convertible Notes into St. Mary shares," said Mark Hellerstein, St.
Mary's Chairman, President and CEO.
This release contains forward-looking statements. These statements involve known
and unknown risks, which may cause St. Mary's actual results to differ
materially from results expressed or implied by the forward-looking statements.
These risks include such factors as the uncertain nature of the expected
benefits from the acquisition of oil and gas properties, the pending nature of
the reported acquisition transaction and the ability to complete the
transaction, the volatility and level of oil and natural gas prices, production
rates and reserve replacement, reserve estimates, drilling and operating risks,
market conditions for the acquisition of oil and gas properties, competition,
litigation, environmental matters, the potential impact of government
regulations, and other matters discussed under the "Risk Factors" section of St.
Mary's 2001 Annual Report on Form 10-K filed with the SEC. Although St. Mary may
from time to time voluntarily update its forward-looking statements, it
disclaims any commitment to do so except as required by securities laws.
PR-02-20