Petro-Canada acquires Prima Energy

Don Whiteley

Petroleum News contributing writer

Following in EnCana Corp.’s footsteps, Petro-Canada has gained a foothold in the U.S. Rockies natural gas region with an acquisition (subject to shareholder approval) of Denver-based Prima Energy Corp.

The Canadian energy giant announced June 8 it would pay US$534 million (US$39.50 per share) for Prima, giving it access to significant production and land holdings in unconventional gas — both coalbed methane and low-permeability tight gas. Both company boards have recommended approval of the deal.

The acquisition is the third major move made by Petro-Canada in recent months, following closely behind purchase of a 30 percent interest in the North Sea’s Buzzard field, and an operating deal for a natural gas project in Syria.

Petro-Canada President Ron Brenneman described the Prima deal as “an excellent fit with our long-term strategy to sustain and expand our core North American natural gas business. Prima has an extensive land position and strong capability in unconventional gas production, offering Petro-Canada an important new footprint and an entry into the fastest-growing segment of continental natural gas supply.”

“We’ve been seeking opportunities to step out from our existing platform in Western Canadian gas and beyond opportunities in Arctic gas and liquefied natural gas from abroad,” Petro-Canada Senior Vice President Kathleen Sendall said at a press conference. “Unconventional gas has been a focus from the start.”

The Prima purchase also follows EnCana’s move into the U.S. Rockies gas industry with its US$2.7-billion takeover of Tom Brown Inc. Brenneman said at the press conference that the Prima acquisition could well be a springboard to further acquisitions in the U.S. Rockies.

Prima’s gas production is expected to double by 2007, from 55 million cubic feet per day at current production levels. Proved gas reserves at the end of 2003 were 152 billion cubic feet — 552 billion cubic feet with probable reserves added.