Merger and acquisition action in Canada's petroleum sector continues to heat up.
Last week, Talisman Energy Inc. agreed to take over Rigel Energy Corp. in a $1.2 billion (Canadian) deal. Both are Calgary firms.
That comes on the heels of Houston-based Burlington Resources Inc.'s offer the week before of $3.7 billion (Canadian) in a friendly takeover of senior Calgary gas producer Poco Petroleums Ltd. (OGJ, Aug. 23, 1999, p. 35).
Meanwhile, Petro-Canada and Suncor Inc., both of Calgary, have confirmed that they broke off talks that sources said were aimed at a possible merger.
Officials of both companies confirmed that talks were held but refused to disclose the agenda. Both Petro-Canada and Suncor are integrated companies with extensive upstream and downstream operations. Suncor also operates a major oilsands project in northern Alberta that is currently being expanded.
Petro-Canada tried to complete a merger of retail operations with Ultramar Diamond Shamrock in 1998 but abandoned the effort in the face of opposition from Canadian competition regulators. A merger of Petro-Canada and Suncor would likely also have faced regulatory hurdles.
And Anderson Exploration Ltd., Calgary, a major natural gas producer has moved to a adopt a shareholder rights plan as a shield against hostile takeover bids. Anderson said it was not aware of any bid at the moment.
Rising prices for natural gas and increasing demand in U.S. gas markets are fueling a search for acquisitions and gas reserves in Canada (see related story, p. 28).
Talisman-Rigel
Under terms of the deal, described as a friendly takeover supported by the Rigel board, Talisman will offer 0.3 Talisman share and $1 cash for each Rigel share. That calls for a total consideration of 17.5 million Talisman shares being issued for about 58.3 million fully diluted Rigel shares and $58 million cash.
The offer works out as $14.78/share for Rigel shares, based on an Aug. 20 closing price for Talisman shares, and represents a 19% premium based on a 30-day weighted average price for Rigel shares.
Talisman Pres. and CEP J.W. Buckee said, "This acquisition is about Canadian gas and North Sea oil." He noted that the deal makes Talisman a dominant player in Canada's Peace River Arch and Alberta foothills plays, pushing the combined firms' production of gas in Canada to 850 MMcfd next year.
In the North Sea, the combined company will own about 54% of the 50-70 million bbl Blake oil field development. In addition, Talisman adds 8,500 b/d of production to its core central North Sea area, as well as a number of high-potential exploration prospects near Beatrice and Buchan fields, which the company operates.
"The acquisition can also be seen as maintaining our strategic balance, reinforcing two of our major operating areas and enhancing our ability to take on additional opportunities in less-mature basins."
With the acquisition, Talisman's production will grow to about 340,000 boe/d in 2000 from the its current level of 246,000 boe/d, with more than 1.1 bcfd of natural gas sales worldwide.
"At $8.66/boe, this is a very fair offer for Rigel shareholders," Buckee said. "However, we prefer to look at it as $0.95/Mcf for Canadian gas, $8.50/ bbl for North Sea oil, and $6.00/bbl for Canadian liquids."
