Merger and acquisition activity remains heated among Canadian oil and gas companies.
In the latest action:
- Canadian Superior Energy Inc., Calgary, made an unsolicited $700 million (Can.) bid to merge with Calgary-based Canadian 88 Energy Corp. Canadian Superior is directed by Greg Noval, founder of Canadian 88 and its president until last year.
- Calgary-based Husky Energy Inc., has agreed to acquire the shares of Avid Oil & Gas Ltd., also of Calgary, that it doesn't already own, for about $93.8 million (Can.).
- Hurricane Hydrocarbons Ltd., Calgary, called a proposed takeover offer by Central Asian Industrial Holdings NV (CAIH) "ridiculously low" and said it was in shareholders' best interest to limit CAIH's stake in Hurricane to 30%.
- Gulfstream Resources Canada Ltd., Calgary, authorized CIBC World Markets Inc., its financial advisor, to examine strategic alternatives to maximize shareholder value, including possible sale of the company or disposition of major assets.
Meanwhile, US oil and gas firms are reassessing their upstream and downstream portfolios, their buying confidence renewed by strong first quarter earnings.
Still in play at presstime last week were two major deals:
- The directors of Barrett Resources Corp., Denver, have rejected Shell Oil Co.'s most recent cash tender offer of $60/share as inadequate. That offer was up $5/share from a bid placed for the company by Shell in early March (OGJ, Mar. 12, 2001, p. 33). With 33.4 million shares outstanding, that would bring the acquisition to $2.007 billion. Shell also would have assumed $400 million of Barrett debt.
- Valero Energy Corp., San Antonio, late last month confirmed it is negotiating with El Paso Energy Corp., Houston, to buy the latter's 100,000 b/d Corpus Christi, Tex., refinery.
Elsewhere, state-owned oil firms continue to make great strides towards privatization.
- As expected, the Norwegian parliament voted Apr. 26 to sell up to 33% of Statoil AS, the government-owned oil company, through a stock offering that could occur as early as June.
- Prime Minister Thaksin Shinawatra is pushing for implementation of the long-delayed partial privatization of the Petroleum Authority of Thailand (PTT).
Superior-Canadian 88 deal
In the all-stock offer, Canadian Superior has set an exchange of 2.75 Canadian Superior shares for each Canadian 88 share.
Canadian 88 Pres. Joseph Pritchett said he was not aware of the offer. He declined comment until the board has studied the offer.
Canadian 88 was put on the market last October after Duke Energy Corp., Charlotte, NC, bought 20% of its stock and replaced Noval with Pritchett.
Canadian Superior filed a lawsuit in Alberta against Canadian 88, involving assets in a sale to Hunt Oil Co., Dallas. The suit alleges that Canadian Superior was denied access to information regarding the assets for sale. Canadian 88 has denied the allegations.
Canadian Superior Chairman Don Axford said the proposed merger would offer "one of the bestellipseand most exciting inventories of world-class exploration prospects in the Canadian Atlantic and significant western Canadian exposure."
Husky-Avid offer
Husky's offer for Avid is a 23% premium over that company's 30-day Class A share average closing price.
Husky acquired a 38% interest in Avid in the August 2000 takeover of Renaissance Energy Ltd., Calgary.
Avid currently has production of 5,800 boe/d, 11.6 million boe of proven reserves, and about 100,000 net acres of undeveloped acreage. Its operations are in the Provost region, West Central, and Peace River arch areas of Alberta.
The Husky-Avid deal is subject to due diligence and regulatory approvals.
CAIH's Hurricane bid
On Apr. 12, CAIH proposed to acquire 18.4 million shares of Hurricane at $10.25/share (Can.) for a total of $189 million (Can.), although no actual offer has yet been made to shareholders. The proposed offer would raise CAIH's ownership in Hurricane to 53% from 30%.
Bernard Isautier, Hurricane chairman, said, "The CAIH proposal would breach the shareholders' agreement between CAIH and Hurricane, which provides that CAIH's ownership cannot exceed 30% unless CAIH acquires shares through an offer for all shares of the company."
The proposed offer also is prohibited under a shareholders rights plan and, if successful, would "result in a massive dilution of CAIH's position," Isautier added.
The proposed offer does not reflect the potential of Hurricane, which produces and refines crude in Kazakhstan, the company claims (OGJ Online, Feb. 26, 2001). Hurricane reported average production of 84,090 b/d in 2000. It plans to increase production by 30% to an average 109,000 b/d and has a $180 million (US) budget in 2001 for pipeline construction, facilities, and field development.
"The potential offer price of $10.25/share is ridiculously low, an opinion shared unanimously by all contacted shareholders and those communicating spontaneously with the company. This price would translate to a value of approximately three times earnings per share for year 2000," Isautier said.
CAIH is based in the Netherlands Antilles and is an affiliate of Kazakh banking group Kazkommertsbank.
Gulfstream sale
Gulfstream also said it is preparing a response for shareholders regarding Roc Oil (Middle East) Pty. Ltd.'s unsolicited offer to buy Gulfstream.
An independent committee formed by Gulfstream's board is considering the offer.
J. Angus McKee, Gulfstream chairman, has called the Roc Oil offer "unrealistic."
The Australian-based Roc Oil has offered $28.3 million (Can.) for 25.75 million Gulfstream shares.
Barrett fends off Shell
The Barrett board has been fighting off Shell's advances for 2 months while inviting other bids. Barrett also suggested last week that Shell submit its best and final offer by May 2, the date other acquisition proposals are due. That still had not occurred at presstime May 2.
Peter Dea, Barrett's president and CEO, also responded to a request by Shell not to enter into a merger agreement that includes breakup fees for any bidder.
"In the event of a transaction with a breakup fee, the stockholders would receive the benefit of the entire consideration. Indeed, because we have pursued a process with a level playing field and because we are seeking to receive best and final proposals from all potential parties on May 2, we believe it is appropriate to consider proposals with breakup fees as an incentive to the parties to submit their best offers. Of course, what would be an acceptable amount will depend upon price," said Dea in a letter to Walter van de Vijver, president and CEO of Shell Oil unit Shell Exploration & Production Co.
Valero eyes refinery
Mary Rose Brown, Valero vice-president of corporate communications, told OGJ Online, "The former Coastal Corp. facility fits our acquisition criteria. We are in negotiations with El Paso."
El Paso completed a $24 billion merger with Coastal Corp., Houston, in January. Valero already owns a 94,100 b/d refinery in Corpus Christi. Brown said she could not comment regarding the El Paso refinery negotiations.
Valero owns and operates six refineries in Texas, California, Louisiana, and New Jersey with a combined crude capacity of 723,000 b/d.
During an earnings conference call Apr. 17, Bill Greehey, Valero chairman and CEO, said, "We remain committed to our strategy of growth through accretive acquisitions and investments in high-return internal projects. There continue to be attractive acquisition candidates."
Valero reported record net income for the quarter ended Mar. 31, 2001, of $136.1 million, $2.13/share, compared with $30.7 million, or 54¢/share, for the same period last year.
"Industry fundamentals remain outstanding and are much better than last year at this time," Greehey said. "Fundamentals are in place for this strong refining cycle to last well into the future."
He predicted 2002 financial returns will beat the 2001 financial returns, adding, "We're going to have some acquisitions behind us."
Earlier this year, Valero agreed to acquire leading California asphalt supplier Huntway Refining Co., Newhall, Calif., in a $78 million transaction. (OGJ Online, Mar. 20, 2001).
Valero bought ExxonMobil Corp.'s 135,000 b/d Benicia, Calif., refinery last year. The Benicia refinery is adjacent to Huntway's largest refinery, a 10,000 b/d plant.
Statoil's privatization
Before the ruling to sell part of its shares, Statoil will be allowed to acquire 15% of the state's holdings in North Sea oil and gas assets on the Norwegian Continental Shelf, officials said.
It's all part of a long-pending move to commercialize the government entity that controls Norway's oil and gas interests.
Earlier last month, a cross-party parliament committee reached a compromise agreement to recommend the sale of a third of Statoil and up to 21.5% of the state's direct financial interest in offshore oil and gas operations (OGJ, Apr. 23, 2001, p. 26). That committee also recommended offering 6.5% of the state's oil and gas holdings to Norsk Hydro AS and foreign operators, up from 5% originally, in addition to the 15% to be bought by Statoil.
Under the compromise agreement, the remaining 78.5% of the state's oil and gas assets will be placed under a new state-owned limited company that is to create value through its management of those assets, with costs and revenues channeled through the government budget.
Once Statoil acquires its share of the government holdings and makes its public offering, officials said, it may seek "cross-shareholdings" with strategic foreign partners.
Gaz de France SA and Ruhrgas AG in Germany have been mentioned as likely candidates. However, some analysts say the partial privatization of Gaz de France could interfere.
This initial move toward Statoil's privatization is far short of CEO Olav Fjell's earlier vision of a fully private company with "caretaker" control of the former state-owned assets, which would allow it the full freedom to compete internationally.
Fjell sat through the 4-hr debate of the issue in parliament Apr. 26. Afterward, he said, "This is a historic day for Statoil."
Once the public offering of Statoil stock is made, Fjell said, "I do not believe that the working day will be much different than before. But we will probably notice that closer attention will be paid to our operations."
Olav Akselsen, Norway's minister for petroleum and energy, described it as a "milestone in Norwegian petroleum history." He said, "The government believes that this is an important step for Statoil's future development and its potential value creation."
PTT privatization
In an initial public offering planned this year, at least 30% of state oil and gas enterprise PTT will be up for sale. The IPO is expected to raise 30 billion baht.
PTT is one of the three state companies expected to make an IPO this year. The others are Thai Airways International PLC and Internet Thailand Co. The government eventually plans to privatize 15 state enterprises.
The prime minister said, "Privatization doesn't have to wait for the economy to improve. Once the state enterprises are ready, they can list."
Some PTT executives have questioned the need to pursue the partial privatization this year, arguing that PTT is profitable and could borrow the funds that it needs.