Imagine Texas oilmen out shopping in Beverly Hills. But these men weren't hopping from one ritzy Rodeo Drive boutique to another. Instead, they had their eyes on the 16 oil wells on the athletic field of Beverly Hills High School.
On Wednesday, the Houston oilmen announced that they will buy the wells and leases on 400 acres in the heart of Beverly Hills. Wainoco Oil Corp. of Houston said it has reached agreement to acquire all the oil and gas assets of Los Angeles-based Waverly Oil Co. for $17 million.
Terms of the agreement call for Wainoco, which is traded on the New York Stock Exchange, to pay $13.5 million in cash and $3.5 million in Wainoco common stock for Waverly's oil and gas properties.
The area, known as the Beverly Hills West Field, is a major source of revenue for the City of Beverly Hills and its school district. In fiscal 1984, the city earned $1.6 million in royalties from the oil property, and the Beverly Hills School District earned $1.3 million.
Waverly, which has about 20 employees and is owned by the Federal Deposit Insurance Corp., First Interstate Bank of Denver and Bank of California, was formed last November by bank creditors of Beverly Hills Oil Co.
Filed for Chapter 11
That company, founded more than 25 years ago, had earlier filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code when it was unable to make loan payments to First Interstate, Bank of California and Continental Illinois National Bank of Chicago.
The FDIC assumed loans due to Continental Illinois when the troubled Chicago bank was taken over by the government.
Beverly Hills Oil Co. had $40 million in debts.
Waverly's sale comes at a time when oil and gas prices are depressed worldwide and the industry is undergoing major restructuring by both large and small companies. James Gibbs, executive vice president of Wainoco, said the company decided to buy Waverly because "we liked the property. It has a lot of oil and gas in place, and it is all concentrated in one area."
The Beverly Hills wells are producing 1,300 to 1,500 barrels of oil per day and 1.1 million cubic feet of gas daily. Their estimated proven reserves are 3.5 million barrels of oil and 3.4 billion cubic feet of gas.
The oil and gas property sits between Beverly Hills' western boundary, which separates it from Century City, and Beverly Drive to the east. Olympic Boulevard borders the area to the south and Elevado Avenue and Bedford Drive are to the north and northeast.
John B. Ashmun, president of Wainoco, said the purchase will double the Houston company's worldwide oil reserves and daily oil production.
"In addition, we believe that there is significant potential for development and exploration under Waverly Beverly Hills West Field leases," Ashmun said in a statement. The company did not elaborate.
Wainoco had 1984 revenue of $45.4 million.
The company plans to set up a California office after the acquisition is completed about Sept. 30. The deal is subject to approval by both companies' boards of directors.