RTZ unloads Nerco oil and gas interests: Sale will recoup half acquisition price - Coal mining business to be retained
The group said yesterday that it had reached agreement for the sale of Nerco's oil and gas interests for a total dollars 510m in cash.
Nerco's Black Lake field in Louisiana and a related pipeline business have been sold to Western Gas Resources for dollars 156m.
In a separate deal, RTZ is disposing of Nerco's offshore oil and gas interests to Louisiana Land and Exploration for dollars 354m.
Proceeds from the disposals are to be used to cut borrowings.
The oil assets being sold produced 95.6 billion cubic feet of gas and 1.9 million barrels of oil last year. At the end of last year proven and probable reserves amounted to 414 billion cubic feet of gas and 10.5 million barrels of oil.
The group paid dollars 470m for Nerco in June and also assumed dollars 692m of its debts. Yesterday's deals are part of RTZ's strategy of concentrating on minerals. It has already sold some of Nerco's precious metals business for about dollars 40m and the rest is the subject of negotiations.
However, Nerco's extensive coal mining interests are being retained. Last year, Nerco produced 16.6 million tonnes of coal, mainly from three open cast mines in Montana and Wyoming. Its reserves total about 580 million tonnes.
The acquisition was the second big expansion of RTZ's US coal interests. In February it paid pounds 121m for Cordero, which operates a mine in Wyoming's prolific Powder River Basin, where Nerco also has substantial interests.
The deals have made RTZ one of Britain's two big players in the US coal industry. The other is Hanson, which owns Peabody Coal, America's largest coal producer. However, the sector is facing considerable price pressures due to weak demand and overcapacity.
RTZ reported an increase in taxable profits from pounds 435m to pounds 537m for the six months to 31 December, on turnover down from pounds 4.9bn to pounds 4.6bn.
A company spokesman said: 'RTZ has disposed of Nerco's oil and gas business since it does not fit the company's strategic objectives.'
RTZ is also understood to be seeking a buyer for Pillar, its big UK building and electrical products business, to concentrate on building on its core mining interests.
The price tag is believed to be about pounds 750m and several big UK companies, including MB Group, are thought to be potential buyers.
The shares closed 9p higher at 669p yesterday. They have climbed from a 12-month low of 492p thanks to a sharp rise in gold prices.
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