Amoco Canada Petroleum Co. Ltd., Encor Inc., and Maligne Resources Ltd. have agreed to an exchange of properties valued at more than $1 billion (Canadian).
Although no money is to change hands, it may be the largest swap in the history of the petroleum industry, Amoco said.
The transaction, to close Mar. 1, involves about 5,000 oil and gas properties in western Canada. Amoco will transfer leases mainly in Alberta and Saskatchewan to Encore and Maligne, whose contributions are yet to be announced. Amoco said each party put up properties about equal in net present value and cash flow.
Maligne is Dow Chemical Canada Inc.'s oil and gas subsidiary.
Dow Canada has been wanting to withdraw from the upstream oil and gas industry, where it has scattered interests but no operatorships. Dow and Amoco have agreed to form Crestar Energy using some of the swapped leases as a base, with Dow operating some of the leases. By 1996 Dow will sell its interest in Crestar, thus removing itself from oil and gas operations.
Amoco Canada will contribute about 20% of its productive capacity to Crestar, with Crestar stock subsequently to be sold in a public offering. That move satisfies an agreement with Investment Canada in 1988 when Amoco acquired Dome Petroleum Ltd. Amoco had said it would offer 20% of Amoco Canada stock to the public but was unable to because of financial considerations.
T. Don Stacy, chairman and president of Amoco Canada, said, "This is clearly a situation where everyone wins. From our perspective, there are two principal benefits of the rationalization. First it provides the base for the formation of Crestar Energy with Dow Chemical Canada Inc. through a further rationalization with Maligne Resources. And secondly, it removes a significant administrative burden, making our operations more efficient."
Charles W. Fischer, president and chief executive of Encor, said, "The conclusion of the rationalization project marks a major step forward in our drive to streamline operations by significantly reducing our property count while increasing working interests, level of operatorship, and control over key facilities. These improvements will make Encor more effective and strengthen the value of the company's asset base."
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