|
Devon Energy expands U.S. control of Canada’s Arctic Launches takeover of Anderson Exploration, the biggest landholder in the Mackenzie Delta and Yukon, but won't accelerate plans until a pipeline is in place Gary Park PNA Canadian Correspondent
Devon Energy has continued the roundup by U.S. energy interests of Canada's prime Arctic oil and gas assets with a friendly C$7 billion bid to acquire Anderson Exploration, giving U.S.-controlled companies an even tighter grip on the immediate development targets.
Assuming the Anderson deal is completed as expected in the fourth quarter, Devon will become the largest holder of Canadian Arctic exploration leases, with 2 million net undeveloped acres in the highly rated Mackenzie Delta-Beaufort Sea as well as the Yukon.
The Devon-Anderson deal comes just two months after Conoco's blockbuster C$9.8 billion takeover of Gulf Canada Resources.
Of the Delta producers' consortium, Imperial Oil is 69.6 percent owned by ExxonMobil, ExxonMobil Canada is a wholly owned subsidiary and Shell Canada, which was incorporated in 1911 and traded publicly for the first time in 1963, is 78 percent owned by the Royal Dutch/Shell Group.
With Gulf Canada and Anderson disappearing into U.S. folds, that leaves a mixed bag of foreign and domestically controlled holders of exploration and discovery licenses in the Mackenzie Delta.
The list includes Anadarko, BP Canada Energy, Chevron Canada, Phillips Petroleum and Murphy Oil among the subsidiaries of foreign-based companies. Canadian players include Alberta Energy Company, Petro-Canada, Canadian Natural Resources, Canadian Forest, PanCanadian Petroleum and Paramount Resources, all of whom are frequently mentioned as likely prey for U.S.-initiated takeover attempts.
Devon takes measured view For now, Devon chief executive officer Larry Nichols is taking a measured view of Arctic development, saying he wants to continue Anderson's plans for the Delta, but does not intend to sped up the pace.
“The plan that Anderson is pursuing is the correct one, and we will continue that,” he said. “The timing of all that hinges more on the prospect of when a pipeline will get built. There is no point in doing too much drilling too soon until there is a pipeline.”
Nichols did not comment specifically on Anderson’s budget of C$100 million for the Northwest Territories this year, dominated by two on-shore exploration wells in the Delta this winter and two more in partnership with Petro-Canada.
In addition, Anderson has planned offshore seismic studies of the Beaufort's shallow coastal waters and has a four-year contract with Akita Drilling to use a new C$18 million Arctic rig.
Ignoring gloomy short-term economic and gas price forecasts, Devon will offered C$40 a share for Anderson, a 52 percent premium on the Aug. 31 closing price which has been hard hit by weakness in gas prices.
It will gain proven reserves of 532 million barrels of oil equivalent, including 2.5 trillion cubic feet of gas, boosting its own holdings by 35 percent, and 8 million net acres of exploration prospects in the Western Canadian Sedimentary Basin and the Arctic.
Company had been 'not for sale' The deal came two weeks after Anderson Exploration's wily founder J.C. Anderson, himself a Nebraska native, brushed off a swarm of rumors by declaring “this company is not for sale ... it’s that simple.”
Anderson arrived in Canada in 1966, hit the big-time by discovering 1.4 trillion cubic feet of gas in Alberta and continued on an aggressive E&P path, culminating this year when he bought Numac Energy for C$962 million.
But, as one of the few remaining senior independents in Canada, he was on every analysts’ list of takeover candidates, following C$35 billion in U.S. takeovers of Canadian companies in the past three years.
Nichols said expansion into Canada as been an “important objective” in his company's pursuit of gas supplies to feed a hungry market.
He said J.C. Anderson had “built an exceptional, gas-weighted production platform with powerful exploration potential.”
Largest independent Devon, if it completes its other current deal to buy Mitchell Energy & Development for US$3.5 billion, will become North America's largest independent producer — edging out Anadarko — at 180,000 barrels per day of gas liquids and 2.2 billion cubic feet per day of gas, of which 87 percent is produced in North America.
To analysts who questioned Devon's willingness to pay C$6 per thousand cubic feet for Anderson’s gas reserves and 52 percent premium for the shares, Nichols defended his timing function of Anderson’s weakened stock price.
“If we announced this deal four or five months ago, the premium would have been 4 percent,” he said, noting that some competitors have recently paid 35 percent premiums at the top end of the market.
“Do the financial numbers work and do the assets work? The answer to both of those questions is a compelling yes.”
He said Anderson’s large gas production and reserves, along with its presence in the Mackenzie Delta, were some of the key drivers of the deal.
“Our long-term view of natural gas is very strong,” he said. "Short term, of course, it depends on the economy and the weather. I think in North America we have an exceedingly tight balance between supply and demand.”
Financing the Mitchell and Anderson deals is underpinned by a $6 billion five-year amortizing loan through a syndicate headed by UBS Warburg and Bank of America. In addition, Nichols plans to divest about $1 billion in properties to aid the financing.
Devon went public in 1988 Created in 1969 by Nichols and his father John, Devon went public in 1988 and embarked on a series of five asset purchases totaling $560 million, setting the stage for its major takeovers.
Mitchell and Anderson were preceded in 1998 by a $781 million acquisition of Calgary-based Northstar Energy, followed in 1999 by PennzEnergy for $1.97 billion and last year by Santa Fe Snyder for $3.47 billion.
“It’s been an incredible stream of acquisitions,” said analyst Wayne Andrews of Raymond James & Associates. “Every time you think, ‘Wow, they’ve really bitten off a lot this time,’ they just go after more. They've created a powerhouse E&P company.”
But Nichols made it plain that Devon has no immediate appetite for more deals. “We do not have the ability to do three deals at once,” he said. “We definitely will not be looking at anything else for the foreseeable future.”
| 