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Anadarko succeeds with white knight offer for Berkley Petroleum C$1.55 billion deal includes oil, major gas holdings in Mackenzie Delta, northeastern British Columbia Gary Park PNA Canadian Correspondent
Anadarko Petroleum, in a bold move to expand its Canadian natural gas position, snatched Calgary-based Berkley Petroleum away from the clutches of Hunt Oil.
In a shoot-out between the Texas rivals, Houston-based Anadarko emerged as the white knight with a successful C$1.55 billion offer for Berkley, to trump two hostile bids from Dallas-based Hunt, which made a final offer of C$1.41 billion. The purchase includes Berkley debt of C$383 million.
With the deal, Anadarko dramatically accelerates its plans to build a natural gas base in Canada, with holdings in all of Canada’s hottest plays — the Mackenzie Delta, northeastern British Columbia, the Alberta foothills and the Scotia Shelf off Nova Scotia.
“We like the assets because they increase our exposure to North American natural gas,” Anadarko chairman and chief executive officer Robert Allison told analysts in a conference call. “This makes us a much stronger player in all of the major plays in Canada. We have identified over 400 drilling locations we can attack.”
Prior to the Berkley deal, Anadarko had announced plans to spend C$360 million this year, drilling 600 wells in Western Canada. The targets are northeast British Columbia’s Jean Marie gas play (where a pair of Anadarko exploration wells have produced 6 million cubic feet per day of gas), southwestern Saskatchewan shallow gas and northeastern Alberta heavy oil, with 10 of its 14 rigs assigned to northeast British Columbia.
In its first full year as Anadarko Canada, whose parent company last year merged with Union Pacific Resources, the company is aiming for 74,000 net barrels of oil equivalent per day from reserves of 220 million barrels of oil equivalent.
The Berkley acquisition adds production of 30,000 barrels of oil equivalent per day and reserves of 95 million barrels of oil equivalent (about 70 percent natural gas) to Anadarko’s holdings.
Anadarko Canada president Jim Emme said the primary initial focus will be Alberta, British Columbia and Saskatchewan, but within two years activity will build in the frontier plays, including the Mackenzie Delta. Anadarko holds 400,000 acres in delta Through the Union Pacific takeover, Anadarko holds 400,000 net acres in the delta. It acquired seismic data this winter and expects to have drillable prospects by 2002.
Its most significant acreage in the north consists of two onshore blocks adjacent to the gas-rich Parsons Lake, with partners Alberta Energy Co. and Gulf Canada Resources (which owns 75 percent of Parsons Lake 1.8 trillion cubic feet of discoveries). In addition, the company holds an exploration license immediately northwest of the giant Taglu field, where ExxonMobil subsidiary Imperial Oil holds 3 trillion cubic feet. Partner favors “over-the-top” route Anadarko, through its North Slope holdings, has indicated it favors the Alaska Highway route for a gas pipeline from the Arctic, but it is not taking a position on developing Canada’s Arctic gas reserves until it has more time to assess those prospects.
However, partner Gulf Canada has been a vigorous proponent of an “over-the-top” route, connecting the North Slope by an undersea line to the Delta and continuing down the Mackenzie River Valley.
“We believe it would be the most cost efficient and would have the least environmental impact,” said Gulf Canada chief operating officer Ron McIntosh, although he said the market can absorb two pipelines.
On the East Coast, Anadarko and its partner BP committed C$97 million in late 2000 for an exploration parcel in the Scotia offshore. The 458,000-acre license is in deep water about 60 miles east of Sable Island, where reserves are estimated at 3 trillion cubic feet. A work program is being developed for the second quarter of 2001. Will sell some non-core assets Allison told a UBS Warburg Energy Conference in February his company plans to sell some non-core assets, most likely in Canada as well as Central and South America. “The things we don’t think we can grow we want to get out of,” he said.
While the company is also looking for more acquisitions, he added it is now “big enough to do what we want to accomplish.”
Without identifying Canadian assets that might be put on the block, a company spokeswoman said all Berkley properties will be closely evaluated.
Berkley, one of the last remaining mid-sized Canadian E&P firms, was pushed into searching for a white knight on Dec. 27 when Hunt launched an unsolicited bid.
The Canadian company developed a mixed bag of bread-and-butter oil production in southeastern Saskatchewan and gas output in northern Alberta along with high-risk exploration in the promising Fort Liard play in the lower Northwest Territories, the Middle East country of Oman and as a 27 percent in California’s highly-touted East Lost Hills gas play.
East Lost Hills produced its first gas in February, after two costly years that included a spectacular blow-out in 1999 that lasted five months.
While juggling its wide-ranging portfolio, Berkley found itself on a stock market roller coaster last year as production fell short of forecasts and operating costs rose. Share prices fluctuated between C$13.95 and C$6.45.
Berkley chief executive officer Michael Rose finally conceded his company was undervalued on the market and vulnerable to an unsolicited bid.
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