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Canadian Natural Resources snaps up northern assets from stumbling Rio Alto C$2.4 billion deal covers natural gas properties in northern Alberta, British Columbia; Canadian Natural also ready to file plans for C$4.9 billion oil sands project Gary Park PNA Canadian Correspondent
Canadian Natural Resources Ltd. has pushed itself into the forefront of Canada’s northern oil and natural gas players by announcing a deal to acquire Rio Alto Exploration Ltd. along with its intention to seek regulatory approval for a C$4.9 billion oil sands project.
The C$2.4 billion offer for the Canadian operations of Rio Alto caught most analysts napping May 13, despite 18 months of intense speculation over likely buyers for the intermediate-sized gas producer as it slashed its reserve estimates by about one-third and fell out of favor with investors.
If the deal is closed by early July, Canadian Natural — better known by its stock symbol CNQ — will climb to fourth place from sixth among independent gas producers in North America and be a powerhouse among operators in Western Canada’s liveliest gas plays.
With assets valued at about C$7.8 billion, CNQ has been one of the industry’s most remarkable turnaround stories. It was picked up for a few cents a share in the early 1980s by entrepreneurs Allan Markin and Murray Edwards, both also part owners of the Calgary Flames of the National Hockey League. Gas exposure 55 percent Markin, CNQ’s chairman, said the deal would increase his company’s gas exposure to 55 percent from 48 percent, boost undeveloped land by 40 percent to 3 million acres and raise cash flow to help finance the Horizon oil sands project in northeastern Alberta.
Gas output from the combined entity would grow by 425 million cubic feet per day to 1.5 billion cubic feet per day as its reserves expand to about 3.6 trillion cubic feet from about 2.38 trillion cubic feet. Its oil reserves will gain 56 million barrels for a combined 860 million barrels — the bulk of which is in northern Alberta’s oil sands region — that yields about 186,000 barrels per day.
In a separate development, CNQ said May 10 that it plans to file a regulatory application next month to proceed with the first stage of Horizon, with access to 5 billion barrels of reserves that is scheduled for start-up in 2007 at 100,000 barrels per day and could expand to almost 300,000 barrels per day within 10 years.
Steve Laut, senior vice president at CNQ, said the Rio Alto assets strengthen CNQ’s near- and long-term gas prospects in the Ladyfern region of northeastern British Columbia and northwestern Alberta, where it believes the greatest gas potential exists in Western Canada. Another consolidation Another consolidation move in Canada’s oil patch occurred May 12, with Paramount Resources Ltd. announcing a deal to buy Summit Resources Ltd. for C$252 million.
The three leading mergers and acquisitions this year have all involved Canadian-based companies as buyers and sellers, starting with the PanCanadian Energy Corp.-Alberta Energy Co. Ltd. merger to create EnCana Corp.
Paramount president and chairman Clayton Riddell said the blending of Paramount and Summit provides a strong overlap of key assets in west-central and northeastern Alberta.
Paramount said it is considering rolling its more mature gas-producing properties, none of them coming from Summit, into a royalty trust.
The trust’s units would be granted to existing Paramount shareholders and would consist of Paramount’s low-risk northeastern Alberta gas production of 100 million cubic feet per day and 500,000 net acres of undeveloped land.
Combined holdings before the formation of a royalty trust would be about 700 billion cubic feet of gas reserves and 15.2 million barrels of oil and natural gas liquids, primarily in Western Canada. Production is about 270 million cubic feet per day of gas and 6,400 barrels per day of oil. Summit would also add 500,00 net acres of undeveloped land to the 4.6 million acres Paramount controls, including 1.6- million acres in Canada’s East Coast offshore.
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