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Plains Exploration Acquires Pogo for $3.6 Billion

Independent oil and gas producer Plains Exploration & Production said it will nearly double its output by acquiring Pogo Producing in a $3.6 billion stock-and-cash deal that came as little surprise to analysts.

Pogo shares shot up about 14%, far surpassing their trading high for the past year. The 52-week range had been $38.01 to $54.92.

As part of the deal, Pogo shareholders will receive 0.68 shares of Plains Exploration common stock and $24.88 of cash for each share of Pogo common stock -- a total consideration of about $60 per Pogo share.

Total consideration for outstanding Pogo shares is 40 million Plains shares and about $1.5 billion in cash, Plains Exploration said.

Both companies are based in Houston.

In February, investment adviser Third Point said it was disappointed with Pogo's financial performance and would push for a new slate of directors. At the time, Third Point said it advised holders controlling 7.9% of Pogo's outstanding shares.

At a time when oil companies were posting record earnings, Pogo in February swung to a fourth-quarter loss and said it was considering the sale of the entire company.

Pogo's earnings in 2006 were $446.2 million, down from $750.7 million in 2005. Annual revenue rose to $1.38 billion from $1.22 billion.

In a research note Tuesday, Goldman Sachs said because Pogo had been pursuing its strategic options, "we do not see the acquisition ... as a major surprise."

Bank of America Securities said it doesn't anticipate a higher bid for Pogo.

In a statement Tuesday, Pogo chairman and chief executive Paul Van Wagenen said the acquisition represents "a significant milestone in the proud and productive 38-year history of Pogo Producing."

James Flores, Plains Exploration's chairman and CEO, said the combined company will benefit from asset diversification and cost savings and have a total estimated reserve potential of 1.4 billion barrels of oil equivalent.

Flores said the deal nearly doubles Plains Exploration's production with the addition of properties in Texas, Wyoming and New Mexico.

The boards of both companies have unanimously approved the takeover and each will recommend the transaction to their respective stockholders for approval. In its news release, Plains said Third Point has agreed to vote its shares in favor of the buyout.

The deal is expected to close in the fourth quarter of this year.

Flores will remain chairman and CEO. Two members of the Pogo board will join the Plains Exploration board at closing.