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Outsiders not welcome in Alberta Energy, PanCanadian deal
Gary Park
Given the ambitious target they have set of barely two months to get regulatory, shareholder and court approval, the leaders of Alberta Energy Co. Ltd. and PanCanadian Energy Corp. are hoping they can get to the altar without any rivals showing up.
In a Jan. 28 conference call with analysts to outline their immediate plans for creating EnCana Corp., AEC’s Gwyn Morgan and PanCanadian’s David O’Brien made it plain they are not interested in competing offers.
“This would be an extremely bad time in our view to sell either company,” said Morgan.
O’Brien indicated he sees the new entity as predator rather than prey. “We think there will be opportunities for selective acquisitions ... to further enhance our asset base and growth profile,” he said.
“We’re coming together at the bottom of the economy and commodity price cycle,” said Morgan, with O’Brien noting that “most companies ... tend to sell at the top of the market, not the bottom.” Done deal William MacLachlan, a portfolio manager at Mawer Investment Management, which holds shares in both companies, said the information he has suggested the merger is a “done deal.
“It seems as if both companies have made a commitment to one another,” he told the Financial Post. “Considering the size of this combined entity, there are only a few players who could come in and trump the merger terms.”
Duncan Mathieson, a Scotia Capital Inc. analyst who has been outspoken in rating PanCanadian as undervalued in the deal, said he would not put a high probability on another offer, given the falling price of oil and gas, while Matt Janisch, with BMO Nesbitt Burns, said only a small number of companies could afford a competing cash bid. Five core growth areas While the two have diverse holdings, with only minimal overlap, they are leaving no doubt that achieving their April deadline for the launch of EnCana is a massive undertaking.
Speaking of the Alberta oil sands, where AEC has a project at Foster Creek and PanCanadian at Christina Lake, Morgan said those are “two of the highest quality resource bases.”
He said project teams will be put together to “assess which we should most strongly concentrate on first.”
The same approach would be taken with coalbed methane, to decide whether to put the most initial capital into AEC’s play in southeastern British Columbia or PanCanadian’s joint venture in the Palliser Block of southern Alberta.
The two identified five core growth platforms that will attract the bulk of their energies initially: AEC’s plays in Ecuador’s Oriente Basin oil field and development of its gas prospects in the U.S. Rocky Mountains; PanCanadian’s Deep Panuke gas project offshore Nova Scotia and its Buzzard oil discovery in the U.K. North Sea; and farm-in programs by both in the Gulf of Mexico, where exploration is expected to start in the next two years.
Other ventures on the leading edge include oil sands projects by both companies in Alberta and AEC’s Ladyfern gas play in northeastern Alberta.
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