|
Canadian trusts hit the takeover trail
Canadian energy trusts, freed from the immediate threat of a tax hit, are back on the acquisition trail.
ARC Energy Trust and Crescent Point Energy Trust forked over a combined C$737 million on Dec. 7 to roll some aging properties into their portfolios.
ARC picked up 40 million barrels of oil equivalent in proved plus probable reserves from sister companies, Imperial Oil and ExxonMobil Canada for C$480 million, raising its production by 5,460 barrels of oil equivalent per day (95 percent liquids) to more than 72,000 boe per day.
ARC Chief Executive Officer John Dielwart described the purchase as “legacy” assets from two of the largest and highest-quality light oil fields ever discovered in Western Canada, where 1 billion barrels has so far been recovered.
The deal included Imperial’s interests in the Redwater field near Edmonton and its stake in the North Pembina field, operated by ExxonMobil.
The purchase price of C$84,000 per boe is in the upper ranks of acquisition prices, but ARC is comfortable with the 20 year reserve life index. Potential EOR prize at Redwater Dielwart said the fields currently have “high operating costs,” although there is a potential enhanced oil recovery prize in the Redwater reservoir that has not been included in the reserves.
“Our task will be to translate that potential into value for our unit holders,” he said.
There is ample confidence in ARC, which Kevin Hall, fund manager of the GGOF Monthly High Income II Fund, has a “very solid management team with a proven long-term track record.”
ARC also has one of the longest reserve life indexes among trusts of 12 years and is “undervalued, given its superior fundamentals,” Hall said.
ARC will finance the deal by selling 9 million trust units to raise C$240 million and use a line of credit to cover the balance.
The trust has also announced plans to spend C$340 million on capital projects in 2006, up about C$70 million from this year, and drill 263 new wells.
Crescent Point turned its attention to southwestern Saskatchewan, where it paid C$257 million to an unidentified seller for 15.4 million boe of proved plus probable reserves, averaging C$51,400 per flowing boe based on 5,000 boe per day.
Once the transaction is completed in January, Crescent Point will produce 16,350 bpd of oil and natural gas liquids and 18 million cubic feet per day of gas.
—Gary Park
| 