Energy Department Takes First Step In Process to Sell Elk Hills Oil Reserve

DOE Seeks Investment Advisor to Help Administer Sale

Washington, DC -  The U.S. Department of Energy today began seeking an investment advisor to administer the sale of the Elk Hills Naval Petroleum Reserve in California -- a divestiture that possibly could become the largest sale of single federal asset since the U.S. Government sold its stock in Conrail to the public in 1987.

In the February 16, 1996, edition of the Commerce Business Daily, DOE is officially announcing that it has begun accepting "expressions of interest" from investment bankers or other qualified advisors who wish to handle the sale of the government's share of the 47,400-acre oil and natural gas field located about 35 miles west of Bakersfield, CA.

"Our objective is to obtain a skilled investment advisor, experienced in petroleum equity and asset transactions, who can assist us in valuing the Elk Hills asset from the perspective of the marketplace, and if a sale is in the best interests of the taxpayer, help us structure a divestiture approach that will maximize the value of this important asset," said Patricia Fry Godley, DOE's Assistant Secretary for Fossil Energy.

Elk Hills currently ranks among the 11 largest domestic producing oil fields in the lower 48 States. It is also one of the nation's 10 largest natural gas fields. Under federal ownership since the early 1900s when it was first set aside to provide crude oil for the U.S. Navy, the field no longer serves its original national defense purpose. It has been operated by the government for the past 20 years strictly as a commercial enterprise.

Today's announcement sets into motion a sales process approved by Congress in the Defense Authorization Act for FY 1996, which President Clinton signed into law on February 10, 1996.

Congress gave DOE two months after the legislation was enacted to retain an investment advisor. To meet the tight timetable, DOE is conducting an expedited selection process permitted under the Federal Property and Administrative Services Act.

The Department is asking for expressions of interest by February 23, 1996.

Initial submissions must describe the respondent's business and organization, list significant oil or natural gas property sales in which the respondent has been involved, provide a description of the respondent's experience in privatization or divestiture of either domestic or international, government-owned oil or natural gas property, if any, and include any other information the respondent deems relevant.

On March 1, the Department will invite the top qualified respondents to briefings at the Elk Hills field to be held March 6-8. By March 27, each respondent must submit a written description of its proposed sales strategy, fee arrangement, and other terms of engagement. DOE will hear oral presentations from each respondent from April 1-3 and will announce its selection on April 9.

To qualify, a respondent must be an investment banker or equivalent financial advisor that operates in the United States and that has participated, since January 1, 1993, in at least one domestic or international oil and/or natural gas property sales transaction with a total value greater than $200 million. Also, certain organizational conflict of interest requirements must be satisfied.

As authorized in the legislation, if divestiture of the Elk Hills field can be successfully arranged, the investment advisor will receive a fee based on a percentage of the sale value.

Interested parties that comply with the requirements outlined in the February 16, 1996, Commerce Business Daily notice should send expressions of interest to: Document Control Specialist, HR-562, U.S. Department of Energy, Headquarters Procurement Operations, 1615 M Street, N.W., Room 240, Washington, D.C. 20036.

DOE Also Names Internal "Divestiture Administrator"

In a related action, the Department also has named John W. Bartholomew as the "divestiture administrator" for the Elk Hills sale responsible for coordinating the government divestiture initiative. He will head an internal DOE team of technical, legal and procurement specialists. During the divestiture process, Bartholomew will be on special assignment from his permanent position as the associate deputy assistant secretary for the Strategic Petroleum Reserve.

-End of Techline-

Information Contact: Robert C. Porter, 202/586-6503, e-mail: robert.porter@hq.doe.gov