By the OGJ Online Staff
HOUSTON, Oct. 9 -- Burlington Resources Inc., Houston, Tuesday offered to buy the stock of Canadian Hunter Exploration Ltd., Calgary for $2.1 billion (US).
Burlington said the acquisition, for $53 (Can.)/share, will nearly double its investment in Canada and add a portfolio of attractive producing properties characterized by low operating costs, long-lived reserves, and promising exploration and exploitation potential.
Both firms are focused on gas production. Gas constitutes 97% of Canadian Hunter's reserves and 80% of Burlington's.
Burlington will gain reserves of 1.2 tcf of gas and 6.2 million bbl of oil, plus 2 million net undeveloped acres and extensive seismic data. Burlington allocated $228 million of the aggregate purchase price to the undeveloped acreage and seismic data, and $250 million for processing plants and other infrastructure.
In 2001, Burlington expects Canadian Hunter to have average net production of 430 MMcfd and 2,700 b/d of oil and condensate. Based on that, Burlington said its purchase cost equates to $1.27/Mcfe of proved gas reserves.
The boards of both companies have approved the deal, which is expected to close later this year. Merrill Lynch Co. and Morgan Stanley Co. were financial advisors for Burlington and committed $1.9 billion (US) of the financing. CIBC World Markets Inc. and Goldman, Sachs & Co. advised Canadian Hunter.
Bobby Shackouls, Burlington chairman, president, and CEO, said, "We have been studying Canadian Hunter's assets for some time, and they are the right fit with our North American natural gas strategy and our returns-based investing."
Steve Savidant, Canadian Hunter president and CEO, said, "Over the past 28 years, Canadian Hunter has grown into one of the most successful natural gas producers in Canada through its relentless pursuit of value."
Burlington said it would sell various properties that do not fit its asset profile and will continue a planned $1 billion stock repurchase program. So far, it has spent $694 million to repurchase 16.3 million shares.
After asset sales, Burlington said its gas reserves will expand 12% to 11.5 tcf of gas equivalent, based on Burlington's year-end 2000 reserves and Canadian Hunter's current reserves.
Burlington said it will gain "Canadian Hunter's dominant position in Canada's Deep Basin, North America's third-largest natural gas producing area, which is only partially developed. Canadian Hunter holds interests in approximately 1.5 million acres in the basin, which features 17 major producing horizons. It is similar to the San Juan basin in the US, where Burlington has utilized its conventional gas and coalbed methane expertise to become the leading producer."