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Providing coverage of Alaska and northern Canada's oil and gas industry
June 2008

Vol. 13, No. 25 Week of June 22, 2008

Compton bows to sales pressure

Compton Petroleum — a rare mid-sized Canadian oil and gas producer — has finally caved in to what many saw as the inevitable, putting itself up for sale just four months after saying it was “puzzled” by a demand from its largest shareholder to consider “strategic alternatives.”

Carrying a market capitalization of C$1.65 billion and production of 33,000 barrels of oil equivalent per day (5,000 barrels of liquids and 170 million cubic feet of natural gas), Compton said it will now start looking for a buyer and hopes to conclude a deal by the fall.

However, the company said it will continue its C$410 million capital spending program and planned 350 wells during the transition period as well as the potential sale of non-core properties that produce 4,000-5,000 barrels of equivalent per day that could fetch C$200 million to C$300 million by the end of June.

“On the capital spending front, all efforts will be directed to maximizing shareholder value during the sale period,” the company said.

Chad Friess, an analyst with UBS Securities Canada, said it is unlikely Compton can now achieve its 2008 target of 36,000-37,000 barrels of oil equivalent per day.

Compton shares have ranged over the last 52 weeks from C$13.45 to C$7.24 and recently hovered around C$12. UBC has a target price of C$15 and CIBC World Markets expects C$14.50.

The company lost more than 20 percent of its share value in 2007, punished by weak natural gas prices, but now that gas has almost tripled from its low point to US$12 per million British thermal units it seems to have decided this is an ideal time to test the market.

Compton was blasted earlier this year by New York-based hedge fund Centennial Energy Partners, which owns 20 percent of the shares, saying that it lacked a clear vision.

In a partial response, the company said it was revisiting its drilling program and capital budget for the balance of 2008 to make greater use of horizontal drilling and multi-stage frac technology.

—Gary Park






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