By the OGJ Online Staff
HOUSTON, Jan. 28 -- Alberta Energy Co. Ltd. (AEC) and PanCanadian Energy Corp. plan to merge during April into a $27 billion (Can.) company to be called EnCana Corp.
The Calgary-based companies said the "merger of equals" would be under the Business Corporations Act of Alberta. Holders of AEC common stock will get 1.472 shares of PanCanadian for each of their AEC shares. On completion of the transaction, PanCanadian shareholders will own 54% and AEC stockholders 46% of EnCana.
The boards of both companies have endorsed the deal, which is subject to stockholder approval and clearance from the Court of Queen's Bench of Alberta and regulatory authorities. The transaction is expected to close in early April.
David O'Brien, PanCanadian chairman and CEO, will be EnCana's non-executive chairman and Gwyn Morgan, AEC president and CEO, will fill the same posts at the combined company. EnCana's board will consist of an equal number of directors from each company.
AEC and PanCanadian said the merged company would be the world's largest independent oil and gas company in terms of enterprise value, reserves, and production.
It would be the third largest publicly traded industrial company in Canada with one of the largest capital investment programs of any Canadian-headquartered company.
O'Brien said, " EnCana will have one of the most attractive internal growth profiles in the industry, given the excellent strategic asset fit and the magnitude and complementary nature of our growth prospects. AEC brings unparalleled near-term and medium-term internal growth from North America and Ecuador, while PanCanadian brings near-term growth in Western Canada and prospects for very strong long-term growth from eastern Canada and the North Sea."
Morgan said, "Our strong balance sheet will enable us to both optimize our capital investment program through the drillbit and to pursue selective acquisitions. We will have the size and technical capabilities to manage the challenges associated with developing high-impact North American and offshore projects. I am extremely confident that we can manage our combined assets and resources to create more profitable growth and higher shareholder returns than either company could achieve on a stand-alone basis."
The companies said within a year the merger will result in a pretax cost savings of $250 million/year from efficiencies in overlapping operations, streamlining business practices, improving procurement practices, building a common information technology base, and incorporating best practices.
The companies also expect to achieve capital program synergies of an additional $250 million/year.
The combined company will have six core growth areas: the Western Canadian Sedimentary Basin (natural gas and oil), offshore East Coast Canada (natural gas), the US Rocky Mountain region (natural gas), the US Gulf of Mexico (oil), the UK Central North Sea (oil), and the Oriente basin of Ecuador (oil).
EnCana also will have exploration activities in the Canadian North, Alaska, Australia, Azerbaijan, the Middle East, and Brazil.
The combined company will have reserves of 7.8 tcf of gas and 1.3 billion bbl of oil and liquids, equaling 2.6 billion boe. Production targets for 2002 are 2.7 bcfd and 255,000 b/d of oil and liquids, or 700,000 boe/d. The 2005 goal is 1.1 million boe/d, a 55% increase from the 2002 production forecast.
EnCana's 2002 capital investment program will be $3.8 billion.
In North America, the merged company will be the largest independent gas producer and the largest independent gas storage operator.
It will have an exploration land base of 23 million acres, including large positions in Canada's Western Basin and East Coast Scotian Shelf. The combined company holds interests in more than 200 blocks in the deepwater Gulf of Mexico and has significant oil sands and coalbed methane interests. Officials plan to drill more than 2,800 exploration and development wells in 2002.
EnCana will have more than $2 billion in combined North American midstream and marketing assets, consisting of energy services, gas storage, natural gas liquids extraction, pipelines, and power generation.