Vintage Pete feels empowered by debt reductions, plans acquisitions

By Paul Deckelman

New York, June 4 - Vintage Petroleum Inc. "spent much of the last two years repairing our balance sheet," a senior executive said Friday - and now that it has essentially reached its near-term debt reduction goals, plans to focus on growth through acquisitions and greater exploitation of the oil and gas reserves it now holds.

The company's vice president for corporate development, Robert E. Phaneuf told a morning session of the three-day UBS Global Oil and Gas Conference in Phoenix, that Vintage - a Tulsa, Okla.-based independent energy company with international operations - was ready to resume a growth strategy stressing new acquisitions as well as increased exploration and improved exploitation of existing properties.

Besides the renewed balance-sheet strength, he said, the strategy would be helped by the recent return of the company's company founder and chairman, Charles Stevenson Jr., to the roles of president and chief executive officer that he once held and now holds once more.

"Charlie will be more aggressive and proactive" toward acquisitions than previous leadership.

Acquisitions, the Vintage vice president noted, "have been a cornerstone of our strategy over time - until very recently - and accounted for our track record of growth."

But having worked hard to reduce its debt burden, Vintage is not about to go on a debt binge to fund any shopping sprees.

Phaneuf said that "in order to preserve our financial flexibility and achieve our desired capital structure, we would finance any acquisition with an appropriate amount of equity, followed by some cash flow, as well as some debt."

The end objective, he said would be "to at least maintain, if not improve, our financial leverage situation as it exists today."

Reaches immediate debt goal

Phaneuf said that Vintage "has achieved our short-term target of reducing debt.

"We started this program in 2002, applying excess cash-flow and proceeds from the sale of non-core assets to reduce our debt."

Since the end of 2002, he said, the company had reduced its debt by $183 million and had paid down a total of $350 million since the end of 2001.

In 2003, it redeemed its 9% senior subordinated notes due 2005, and in February, Vintage completed the redemption of its $150 million of 9¾% senior subordinated notes due 2009. It still has outstanding its 8¼% senior notes due 2012, its 7 7/8% senior notes due 2011, and about $138 million of outstanding debt under its revolving credit facility.

All told, at the end of the first quarter, Vintage had only $620 million of net debt, he said - about 2.2 times anticipated cash flow this year.

"Our goal is to continue to reduce debt, so it becomes a lower multiple of our cash flow in any given year," the executive said.

Vintage still has substantial borrowing capacity on its bank loan, he noted, of $161 million, and no note maturities before 2011.

"So we think we are in very good shape financially and certainly poised to make acquisitions and do other types of things that would allow us to move forward from a production-growth standpoint."

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