Abu Dhabi unit poised to swoop again

Gary Park

For Petroleum News

Having wrapped up its C$5 billion takeover of PrimeWest Energy Trust, TAQA North — 75 percent owned by the Abu Dhabi government — is scanning the horizon from its 51st floor office in downtown Calgary, hunting for prey.

A series of lightning strikes over the past year has netted TAQA 600 employees in Canada and production of 105,000 barrels of oil equivalent per day, claiming the No. 12 spot among Canadian producers.

Don Garner, newly appointed chief executive officer of the Canadian unit of Abu Dhabi National Energy Co., said his company now has the base that provides access to capital and “good caliber people,” reducing the growth risk.

That goal has been set at building a C$20 billion business by 2012 from the current value of C$7.5 billion, ranging from further oil and gas acquisitions — big or small — followed by possible moves into the oil sands, pipeline sector, natural gas storage and power generation.

“You’re going to see TAQA bring in large amounts of capital, developing mature assets in the lower-risk end of the spectrum,” he said.

Garner said U.S. credit crisis is limiting access to capital by Canadian and U.S. companies, but teaming up with TAQA effectively removes those barriers.

RBC Capital Markets analyst Dirk Lever said TAQA’s deals in Canada are a sign of things to come as governments such as Abu Dhabi are able to use their huge financial resources to diversify worldwide.

The Canadian unit has set a capital budget of C$500 million and plans 500 wells in 2008, with the goal of replacing 140 percent of production.

The 2008 spending will concentrate 90 percent on natural-gas weighted projects in Alberta and British Columbia, with some spill over to Saskatchewan and the United States.

Garner said PrimeWest and its Shiningbank Energy Trust acquisition had established C$1.5 billion of “very executable” development opportunities when TAQA made its takeover bid.

He said completion of the transaction is a “great opportunity for us to breathe some life into these opportunities,” which are believed to be economical with gas prices at a minimum C$6 per thousand cubic feet, but he noted that TAQA has no plans to embark on greenfield exploration, preferring to lower risk through farm-out structures or other means.

Garner also said top professionals — many of them laid off in the meltdown and consolidation taking place among energy trusts and junior E&P companies — are attracted to TAQA’s expansion-minded strategy and its international prospects.

Opportunities will be studied

He said TAQA did not expect to spend $7.5 billion in Canada last year, “but in 2008 we could have a year like we had in 2007.”

Barker-Homek said TAQA has established a $21 billion business in nine countries, but TAQA North is the first business that “we can grow organically.”

Canada’s Industry Minister Jim Prentice has ruled that TAQA’s takeover of PrimeWest will be a net benefit to Canada.

Barker-Homek expressed his gratitude to the government for the trust and confidence placed in TAQA, adding: “Be assured, we won’t let you down.”

The betting among some analysts is that Compton Petroleum — which hung out a For Sale sign in December — might be next on TAQA’s shopping list.

There’s been talk of a C$2 billion offer, which would make Compton shareholders happy, given the company’s current market value of less than C$1.3 billion.

Asked about Compton, Garner coyly remarked: “We’re friendly with them.”

BMO Capital Markets analyst Mark Leggett in a recent research note said Compton’s southern and central Alberta asset base would fit “strategically” with TAQA’s focus on Canadian tight gas and coalbed methane.

Salman Partners analyst Kyle Preston shared the view of Compton as a “logical” takeover candidate, but questioned whether Compton’s less conventional resource plays would be an ideal fit with TAQA.