updated 12/13/2005 7:44:37 AM ET 2005-12-13T12:44:37

ConocoPhillips Co. announced plans to acquire oil and gas producer Burlington Resources Inc. for $35.6 billion, in a deal illustrating the surge in both the price and industry demand for natural gas.

The deal announced by the Houston-based companies Monday night will be the the biggest such transaction in the energy in several years. If approved by Burlington shareholders, it would make ConocoPhillips one of the nation's top producers of natural gas.

The deal "enhances ConocoPhillips' production growth and North American gas supply position both in the near-term, through projects involving conventional and unconventional resources, and in the long-term through LNG (liquid natural gas) and Arctic gas projects," ConocoPhillips Chairman and CEO Jim Mulva said in a written statement.

Mulva said Burlington Resources was "an excellent complement" to the oil and gas portfolio of ConocoPhillips, the nation's third biggest energy company.

"The combination of ConocoPhillips and Burlington Resources recognizes the substantial value we have created and acknowledges the success of our employees in building a great company with a strong asset base," said Bobby S. Shackouls, chairman, president and CEO of Burlington Resources.

The deal calls for investors in Burlington Resources to receive $46.50 in cash and 0.7214 shares of ConocoPhillips common stock for each Burlington share they own. The companies said that was equal to $92 per share, based on the closing price of ConocoPhillips stock on Friday.

Existing ConocoPhillips shareholders would own about 83 percent of the company after the transaction and Burlington Resources shareholders about 17 percent.

Analysts said ConocoPhillips was interested in Burlington Resources' operations in gas fields in North America, which have gained in value as strong demand pushed prices higher.

They said large oil companies, which are enjoying record profits and sitting on huge cash reserves, would look to acquire other independents, such as EnCana Corp., Devon Energy Corp., Anadarko Petroleum Corp., Chesapeake Energy Corp. and Pioneer Natural Resources Co.

Analysts said the cost of exploring for oil has risen, making acquisitions the quickest and easiest way for the big players to grow even larger.

"It's cheaper for companies to buy production and reserves on Wall Street than go drill for it," Fadel Gheit, an analyst with Oppenheimer & Co., said in an interview with The Associated Press. "It's instant gratification."

Gheit said ConocoPhillips would be paying a slim premium for Burlington Resources shares, which he said reflected the fact that Burlington shares had already risen 75 percent from the beginning of the year through Friday's close.

A combined ConocoPhillips and Burlington could shave capital spending 5 to 10 percent without hurting production simply by eliminating duplication, he said.

The deal would nearly double ConocoPhillips' global natural gas production, JP Morgan analyst Jennifer Rowland said in a note to clients before the transaction was announced.

ConocoPhillips said it would fund the acquisition with existing cash, existing credit facilities and new additional bank and bond debt. The company said it would use future cash from operations to reduce its outstanding debt.

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