Highpine taking a final bow

Once a hot favorite with investors, Calgary-based Highpine Oil & Gas is likely to disappear altogether in a C$530 million takeover by Daylight Resources Trust.

Despite a string of promising discoveries, Highpine never managed to achieve its full potential, falling short of growth targets, partly because of disputes with landowners that stalled critical wells.

In the process, its shares slumped from C$24.75 in 2006 to a low of C$3.75 last winter, but reached C$6.68 on the strength of Daylight’s offer.

Daylight’s offer of cash and shares worth C$7 is a 38 percent premium to Highpine’s 20-day trading average.

If completed in October, it will create a new intermediate-sized company with production of about 40,000 barrels per day and a market value of C$1.8 billion.

The combined assets will give Daylight a strong inventory of unconventional gas plays and raise its oil weighting to 40 percent of production from 28 percent, with a solid base in west-central Alberta.

Daylight said the deal allows it to fund a larger capital program while keeping cash payouts at current levels. In addition, tax pools of more than C$1.4 billion will allow it to make a conversion to a tax-paying corporation after the Canadian government removes the tax benefits available to trusts on Jan. 1, 2011.

—Gary Park