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Burlington Resources continues building northern corridor Company makes cash bid for gas-rich Canadian Hunter Exploration to become North America’s third-largest gas producer, with special focus on Rocky Mountain region By Gary Park PNA Canadian Correspondent
Houston-based Burlington Resources Inc. ended rampant speculation over the likely suitor for Canadian Hunter Exploration Ltd. with a C$3.3 billion all-cash bid for the Calgary-based company that moves it into the No. 3 spot among North American gas producers, behind only ExxonMobil Corp. and BP p.l.c.
It’s part of a Burlington strategy to develop its own supply corridor from the Arctic, down the Rocky Mountains in Canada and the United States and ending at the San Juan Basin.
The Oct. 9 deal, unanimously approved by both boards of directors and due to close later this year, will almost double Burlington proved reserves in Canada to 2.8 trillion cubic feet equivalent and boost its gas output to about 870 million cubic feet per day.
Although the company has properties in the East Irish Sea, the North Seam China, Latin America and Africa, the inclusion of Canadian Hunter’s holdings will mean 90 percent of its assets are in North America, of which 90 percent will be gas and 40 percent of the gas reserves will be in Canada.
Burlington will step up drilling program Burlington chairman, president and chief executive officer Bobby Shackouls told a conference call that the potential upside for Canadian Hunter, with chances to discover 3.2 trillion cubic feet equivalent of probable and possible reserves, “will fuel our growth for years to come.”
He said Burlington plans to step up Canadian Hunter’s drilling program, certain that the fundamentals for North America’s gas prospects are strong and partly because there has been “very little supply response from record drilling levels” that could lead to a rapid tightening of supplies.
Burlington executives said the jewel in the deal is Canadian Hunter’s Deep Basin interests, including 1.5 million acres that could hold 1.7 trillion cubic feet equivalent of probable and possible reserves.
Shackouls said the Deep Basin, where Canadian Hunter pioneered deep drilling in the foothills of Canada’s Rockies, was complementary to Burlington’s major assets in the San Juan Basin of New Mexico and Colorado.
Because the Deep Basin is less mature than San Juan, Burlington believes it can draw on its experience to add “significant value” to its new Canadian properties by drilling up to 120 wells a year.
Company has acreage across Arctic Occupying a dominant role in the Canadian Rockies also strengthens Burlington’s bridge to the Arctic, where it has established footholds in both the North Slope and Mackenzie Delta this year.
In June it joined the parade of companies setting up camp on both sides of the Alaska-Canada border, using its Canadian subsidiary as the vehicle to win 32 tracts of land in the state of Alaska’s North Slope Foothills areawide lease sale.
That followed its acquisition of 540,000 exploration acres in the Mackenzie Delta, either on its own or in partnership with BP and Chevron Canada Resources.
Burlington director of investor relations John Carrara said at the time that Burlington was seeking an option on its future plans. “We believe two pipelines will be built that with provide access for Mackenzie and Alaska gas,” he said.
Carrara said both the North Slope and Mackenzie Delta fit into the narrow, but long corridor of Burlington properties stretching from the Arctic, down Western Canada to the U.S. Rocky Mountains and San Juan Basin.
The Burlington-Canadian Hunt deal, approved unanimously by both companies’ boards of directors, involves an offer of C$53 a share, almost C$14 above Canadian Hunter’s last closing price and C$7 above its 52-week high.
After 28 years in business, Canadian Hunter has accumulated proved reserves of 1.2 trillion cubic feet and 6.2 million barrels of oil, producing a daily average of 430 million cubic feet of gas and 2,700 barrels of oil and condensate. The Canadian Hunter reserves expand Burlington’s reserve base to 11.5 trillion cubic feet of gas equivalent.
Deep Basin is major prize The major prize is Canadian Hunter’s 1.5 million acres in Western Canada’s Deep Basin, which ranks as North America’s third largest gas field and features 17 major producing prospects. Canadian Hunter also has interests in seven major fields in the Western Canadian Sedimentary Basin, the source of about 80 percent of Canada’s gas output.
Burlington made its first foray across the border in 1999, buying Poco Petroleums Ltd. for C$4.2 billion, then added 46 billion cubic feet of reserves from Petrobank Energy and Resources Ltd. for C$57 million. It’s also bogged down in regulatory squabbling in Alberta that has blocked the negotiated sale of 251 billion cubic feet of reserves, plus 314,000 net acres, by Atco Gas to Burlington for C$550 million.
Burlington’s move is the latest in a series of takeovers by U.S.-based companies pursuing natural gas sources in Canada. The other big transactions have seen Devon Energy Corp. buy Anderson Exploration Ltd. for almost C$7 billion and Conoco Inc.’s purchase of Gulf Canada Resources Ltd. for C$9.8 billion.
Shackouls said Canadian Hunter’s assets are “the right fit with our North American natural gas strategy.”
He said the “combination of current production, outstanding long-range potential, high working interests and its proximity to our own major production in Canada make it a crown jewel.”
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