BP Amoco Plc had to open its wallet a little wider-to $83 per share-to take over Vastar Resources Inc. following a flurry of good news about the Houston independent's deepwater Gulf of Mexico properties. BP Amoco had offered $71 per share for the roughly 18% of Vastar that it did not own upon acquiring Atlantic Richfield Co. Vastar announced a potentially significant discovery at Entrada, its in deep water, and an accelerated development schedule at Horn Mountain. Frank D. Bracken III and Steven K. Zachritz, who follow E&P stocks for Jefferies & Co., said in a recent report that if Vastar remained independent, shareholders could reasonably expect shares to reach $117 within two years. Horn Mountain is now scheduled to go onstream by late 2002 instead of mid-2004. Potential reserves are 150 million BOE, and peak flow of 70,000 BOE a day is expected by mid-2003. "The acceleration of Horn Mountain represents a very meaningful material acceleration in cash flow for the company," Bracken said. "The discovery of Entrada... really validated the program. And for anyone to suggest that Vastar wouldn't have continued deepwater success if it were to remain on its own, I think it would be a ridiculous comment to make." The company's recent wildcat well at Entrada, a four-block field in the Garden Banks area, encountered more than 360 net feet of pay in four high-quality intervals. Early prognosticators have estimated the field may have a reserve potential of 150 million BOE. Looking beyond Vastar's current crop of discoveries, there lies an impressive deepwater Gulf of Mexico portfolio of 55 undrilled prospects, said Irene Haas, analyst with Sanders Morris Mundy. "When everything is said and done, I think that drilling portfolio is worth $20 a share." One of those prospects, Mount Etna, is especially intriguing because it lies next to BP Amoco's Crazy Horse discovery in the Mississippi Canyon area. The London multinational oil company announced a reserve potential of 1 billion BOE at Crazy Horse, and rumors are circulating that appraisal drilling could bump that figure higher. The Jefferies analysts figure Mount Etna, which looks to be part of the Crazy Horse discovery on seismic, has a potential of 200 million BOE. -Jodi Wetuski
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