Catsimatidis Persists, Chaparral Gives In

Story from Forbes

After a two-year hunt for a big acquisition, billionaire's United Refining Energy to acquire oil producer in $1.6 billion deal.

Billionaire John Catsimatidis is set to announce Monday evening the acquisition of privately held Chaparral Energy in a deal worth roughly $1.6 billion.

The New York real estate tycoon, who ranks 212th on our list of the richest Americans, told Forbes that Chaparral's oil in the ground "will be a great hedge against inflation." Oklahoma City-based Chaparral has proved reserves on the order of 150 million barrels, with average daily production of 21,000 barrels per day. Catsimatidis' United Refining Energy ( URX - news - people ) will put up $450 million in cash and assume $1.1 billion to $1.2 billion in Chaparral's debt. United Refining, a blank-check vehicle that Catsimatidis took public in late 2007 to raise money for an acquisition, was coming up on a deadline of Dec. 11 to use the money or return it to shareholders.

Catsimatidis says that the new company will retain the Chaparral name, and will seek a new listing on the New York Stock Exchange.

This year, Chaparral, like many small oil and gas producers, has been faced with increased difficulty in raising cash to keep up aggressive drilling schedules. At current oil and gas prices, Chaparral looks to generate roughly $300 million in operating income next year, but it has plans to invest some $400 million in drilling new wells. Catsimatidis says United's cash will finance solid growth.

Chaparral's assets are focused in the Permian basin of West Texas, along the Gulf Coast and in the Rocky Mountains. The company employs so-called enhanced oil recovery methods in many of its fields, which involves injecting mature wells with a high-pressure mix of carbon dioxide, increasing oil flow. The company owns interests in nearly 400 miles of carbon dioxide pipelines.

It's not the first time Chaparral has tried to find a dance partner. Last year it agreed to merge with Houston-based Edge Petroleum, but the companies called off the deal after being unable to obtain financing. Edge Petroleum filed for Chapter 11 bankruptcy protection Oct. 2.