Tracinda to buy 35 percent stake in Delta Petroleum

NEW YORK (Reuters) - Billionaire investor Kirk Kerkorian's Tracinda Corp will pay $684 million to acquire a 35 percent stake in Delta Petroleum Corp (DPTR.O), the independent oil and gas company said on Monday.

Tracinda will buy 36 million Delta shares for $19 per share, a premium of about 23 percent to the stock's Friday closing price, the company said, and have the right to nominate

one-third of the members of Delta's board of directors.

For Kerkorian, the move is a big bet by the 90-year-old billionaire on a company with a weak stock performance but the potential to hit big with new fields in the western United States.

Denver-based Delta, whose stock had suffered a 33 percent drop in 2007 before rallying more than 20 percent on Monday, has faced difficulties developing new projects, but could see its fortunes improve if a new field in Utah delivers on its promise.

"I think the way Tracinda has to be looking at Delta, and I think the way Wall Street looks at Delta, is it's a company with lots of potential, and a lot of risk," said Dan Pickering, analyst at Tudor, Pickering, Holt & Co Securities in Houston.

The Utah field, the Greentown Project in the Paradox Basin, is currently undergoing testing, and the company said earlier this month it could yield "immense reserve potential."

Delta, which reported third-quarter production of 4.58 billion cubic feet of natural gas equivalent and expects output to grow by 40 to 60 percent in 2008, has core operations in the Rocky Mountains and Texas.

The Tracinda investment now allows Delta Petroleum to accelerate development drilling activities at the Paradox basin, as well as in Colorado's Piceance basin.

"The additional capital provides Delta the financial flexibility and wherewithal to grow the company to new levels," Delta Chairman and Chief Executive Roger Parker said in a statement.

Last month, Kerkorian's company canceled its offer to buy 16 percent of refiner Tesoro Corp (TSO.N) after the company adopted a 'poison pill' shareholder rights plan that would have prevented Tracinda from taking control of it.

Shares of Delta rose 21.8 percent to $18.89 on the Nasdaq in Monday morning trade.

Those share have had a difficult year, sliding to an 18-month low earlier this month at $13.06, less than half its all-time high of $30.47 reached in November 2006

(Reporting by Avishek Mishra in Bangalore and Matt Daily in New York; Editing by Deepak Kannan and Dave Zimmerman)