Pogo Producing Company Announces Agreement to Acquire Latigo Petroleum, Inc.

HOUSTON, April 17 /PRNewswire-FirstCall/ -- Pogo Producing Company today announced that it has entered into a definitive agreement to acquire privately held Latigo Petroleum, Inc. ("Latigo") for a total cash purchase price of $750 million.

The acquisition of Latigo and its assets in the Permian Basin and Texas Panhandle is expected to:

* increase Pogo's total proven oil and gas reserves by 13%, from 2,042 billion cubic feet of natural gas equivalent ("bcfe") to 2,317 bcfe; * complement Pogo's existing core operating area with a significant under developed contiguous acreage position; * extend Pogo's indicated reserves life to approximately 10 years; * add over 400 development and exploration drilling locations to Pogo's inventory.

Under the agreement, Pogo will acquire 275 bcfe of estimated proven reserves on approximately 404,700 net acres. Latigo's reserves are 49% natural gas and 51% oil. Beyond the proven reserves, Pogo believes that Latigo's properties contain high quality probable reserves and significant exploration potential. After allocating $60 million of the purchase price to Latigo's sizeable, as yet unexplored but prospective, leasehold acreage position and its extensive new 3-D seismic database, Pogo's acquisition cost per estimated proven reserves, would be $2.51 per thousand cubic feet equivalent ("mcfe").

BENEFITS OF THE LATIGO TRANSACTION

Critical Mass and Scope. The acquisition provides Pogo with additional critical mass in a core Pogo area in the Permian Basin and panhandle of Texas.

* Latigo owns approximately 405,000 net acres with a working interest of over 70%. * Latigo's properties offer a large inventory of drilling prospects, including over 400 currently identified drilling locations. Due to a large undeveloped acreage position, Pogo expects to pursue numerous high-potential, 3-D seismic driven exploratory prospects. * Latigo operates over 90% of its total daily production, recently averaging about 3,300 net barrels of crude oil and 20 million cubic feet ("mmcf") of natural gas per day. * Latigo reserves are well balanced, with 49% natural gas and 51% oil. This balanced asset mix helps Pogo continue to minimize its exposure to the price cyclicality inherent in being tied exclusively to any single energy source. * Latigo's reserves life of 18.8 years extends Pogo's overall reserves life to about 10 years.

Significant Exploration and Development Opportunities. Latigo's development activities are concentrated in Texas, including the Collie Field in Reeves and Ward Counties, and the Courson Ranches areas located in Roberts and Ochiltree Counties. Key exploration plays have been identified in the 250,000 acres of the panhandle Ranches area.

* Latigo's Permian Basin area hydrocarbons are adjacent to many of Pogo's fine existing fields and are characterized by long reserves life and low decline rates. Approximately 60% of Latigo's reserves and 50% of its total production are located in this predominantly oil-bearing region. Development opportunities targeting the Delaware and the Grayburg/San Andres formations appear to be particularly promising. Pogo believes that many significant upside opportunities exist in this region, where over 200 infill and step-out drilling locations have been identified. * Approximately 40% of Latigo's reserves and 50% of its production are located in the panhandle of Texas. Pogo will be acquiring established fields with significant development potential, as well as exploration based upon newly acquired 3-D seismic in the panhandle Ranches area to test multiple horizons, including the Brown Dolomite, Granite Wash, St. Louis, and Hunton. * Latigo currently has seven rigs operating and Pogo's drilling agenda for 2006 will include adding two more rigs and drilling more than 100 locations.

"We are pleased to announce the acquisition of Latigo, which fits into our strategy to grow Pogo's asset base in North America. Latigo will provide Pogo with a balanced portfolio of proven reserves, low risk development and extensive exploration opportunities," said Paul G. Van Wagenen, Chairman and Chief Executive Officer of Pogo. "The addition of Latigo's properties, in one of Pogo's most active geographic areas, will result in significant, cost- effective growth," Mr. Van Wagenen concluded.

Pogo has entered into costless collars covering about 75% of Latigo's current production volumes extending throughout the remainder of 2006 and full year 2007 and 2008. Pogo has oil costless collars covering 2,500 barrels of oil per day with a floor of $60.00 per barrel and ceiling averaging $84.25 per barrel for the balance of 2006, $60.00 per barrel by $83.15 per barrel for all of 2007, and $60.00 per barrel by $80.13 per barrel for all of 2008. Pogo has gas costless collars covering 15 mmcf/d of gas with floors of $7.00 per mcf and ceilings ranging from $10.60 to $10.70 per mcf for the remainder of 2006; $8.00 per mcf by $13.40 to $13.65 per mcf for all of 2007; and $8.00 per mcf by $12.05 to $12.25 per mcf for all of 2008.

Pogo intends to finance the Latigo acquisition utilizing cash on hand, capacity under its existing revolving credit facility and opportunistic capital market transactions. Regarding 2006 results, Pogo expects to update the full year 2006 guidance on April 25, 2006, in conjunction with the release of the company's first quarter 2006 results. The transaction is subject to customary regulatory approvals and is expected to close during May of 2006.

Pogo Producing Company explores for, develops and produces oil and natural gas. Headquartered in Houston, Pogo owns approximately 3,885,000 gross leasehold acres in major oil and gas provinces in North America, 1,044,000 acres in New Zealand and 1,480,000 acres in Vietnam. Pogo common stock is listed on the New York Stock Exchange under the symbol "PPP."

Latigo is a privately owned exploration and production company that was formed by Latigo Management, Warburg Pincus LLC (http://www.warburgpincus.com/ ) and JPMorgan Partners (http://www.jpmorganpartners.com/ ) in 2002.

Warburg Pincus has been a leading private equity investor since 1971. The firm currently has approximately $13 billion under management and invests in a range of industries including energy, real estate, information and communication technology, healthcare, LBOs and special situations, media and business services and financial services. Warburg Pincus has raised 11 private equity investment funds which have invested approximately $23 billion in 540 companies in 30 countries. Currently the firm is investing from an $8 billion fund which closed in August 2005. The firm has invested approximately $1.5 billion in energy companies involved in oil and gas exploration and production, energy and power projects and oilfield and other services since the late 1980s.

J.P. Morgan Partners, LLC (JPMP) is a leading private equity firm with approximately $10 billion in capital under management as of December 31, 2005. Since its inception in 1984, JPMP has invested over $15 billion worldwide in consumer, media, energy, industrial, financial services, healthcare, hardware and software companies. With more than 75 investment professionals in five principal offices throughout the world, JPMP is an experienced investor in companies with worldwide operations. JPMP is a private equity division of JPMorgan Chase & Co. , one of the largest financial institutions in the United States, and is a registered investment adviser with the Securities and Exchange Commission.

Except for the historical and present factual information contained herein, the matters set forth in this release include statements of management's current expectations as to efficiencies, cost savings, market profile and financial strength, and the competitive ability and position of the company. Statements identified by words such as "expects," "projects," "plans," "believes," "estimates," and similar expressions are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the possibility that the anticipated benefits from Pogo's operations cannot be fully realized, the possibility that commodity prices, costs or difficulties related to the conduct of its business will be greater or lesser than expected, and the impact of competition and other risk factors relating to our industry will be greater than expected, all as detailed from time to time in Pogo's reports filed with the Securities and Exchange Commission. Pogo disclaims any responsibility to update these forward-looking statements.