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American raiders embark on Canadian buying binge, spend $14 billion Many have their eye on large prizes in the Arctic and Western Canadian Sedimentary Basin Gary Park PNA Canadian Correspondent
Some arrive with a warm handshake, others with their elbows out, but whatever the approach there is no doubt that Americans are - for the first time since they were driven out 20 years ago by nationalist ownership policies - again influential players in Canada’s oil patch.
U.S. E&P companies, most of them anxious to get their hands on natural gas assets in Canada’s highly-rated Western Canadian Sedimentary Basin and Arctic, have spent an estimated C$14 billion on takeovers and property acquisitions in the past three years.
None has created a greater stir than Houston-based Apache, which has followed a quiet C$217 million takeover of DeKalb Energy in 1995 with three high-profile acquisitions. Apache makes three purchases In the space of 15 months, Apache paid C$761 million for Shell Canada’s conventional properties in Western Canada, C$912 million for Fletcher Challenge’s assets and C$745 million for Phillips Petroleum’s coveted properties in northwestern Alberta. The net result is a Canadian production of 98,000 barrels of oil equivalent per day and 338 million barrels of reserves which cost an average U.S.$5.66 per barrel.
Apache Canada president Floyd Price was posted to Canada after five years running Apache’s overseas operations just as the tiny 94-employee operation in Canada was reaching for the spotlight.
He said 30 percent of Apache’s reserves are now in Canada, creating a launching pad from northern Alberta and British Columbia for the huge gas prospects of the Mackenzie Delta and Beaufort Sea.
“We’d like to get up to the Northwest Territories,” Price said. “It’s hot up there.” Equally, he said Apache Canada is eyeing gas prospects off the East Coast.
Mark Meyers, of the Houston investment firm of Simmons & Co., said the Canadian assets represent a “simpler business model for Apache. They like to acquire under-performing assets and harvest the low-hanging fruit.”
He praised Apache’s skill at expanding in a high-priced, competitive market. “They said they were going to do it efficiently and that’s what they did while a lot of their competitors were standing on the sidelines saying deals couldn’t be done because of commodity prices,” he said. Hunt Oil makes two acquisitions At the other end of the popularity scale is privately held Hunt Oil, which has ruffled feathers with two hostile takeover attempts on either side of a friendly C$760 million buyout of Newport Petroleum’s production of 118 million cubic feet per day of gas and 11,252 barrels per day of liquids.
Its unsolicited C$776 million bid last April for Ulster Petroleum disintegrated under a C$911 million counter-offer by Anderson Exploration and it ended the year with a hostile run at Berkley Petroleum for C$760 million, which caused Berkley to swallow a poison pill and open a data room to possible white knights.
But Hunt, which has been active in the East Coast offshore, is undeterred in its determination to “build an excellent platform for future growth in Canada,” said Hunt CEO Ray Hunt.
Andrew Hogg, an oil and gas analyst with Yorkton Securities, said Hunt has shown a clear determination to make acquisitions. “This is a good time to do hostiles because most companies in the sector are trading at significantly below their real value and a hostile has a better chance of being successful,” he said. Gas assets targeted Many apparently share that view as investment bankers from New York roll into Calgary seeking out takeover targets, especially gas assets now that Canada has surplus pipeline capacity to U.S. markets and the potential to multiply its 64 trillion cubic feet of proven gas reserves by 10-fold.
The buyers over the past year have been dominated by Apache, Hunt, Murphy Oil, Burlington Resources, Anadarko Petroleum, Conoco, Samson and Unocal and the opportunities remain plentiful in Canada, which still has 360 publicly traded E&P companies compared with 205 much larger entities in the United States.
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