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Pengrowth to buy NAL Energy for $1.9 billion

Published: 08:27 23 Mar 2012 EDT

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Canadian oil and gas producer Pengrowth Energy Corp (TSE:PGF)(NYSE:PGH) said Friday that it will buy NAL Energy Corp (TSE:NAE) in a deal valued at about $1.9 billion, including debt, to add light oil assets.

NAL stockholders will receive 0.86 of a Pengrowth share for each share held, owning 26 percent of the combined company after the deal closes.

Based on March 22 closing prices of Pengrowth and NAL, the exchange ratio reflects a premium of 9.7 percent for NAL shareholders.

The boards of both companies urge their respective shareholders to vote in favour of the deal.

"The combination of Pengrowth and NAL represents the continued execution of our value creation strategy. The addition of the NAL assets will enhance our cash flow base and further augment our robust light oil drilling inventory," Pengrowth chief executive Derek Evans said.

"The larger inventory of high netback light oil opportunities of the combined asset base enables us to high grade our investment
opportunities which should lead to improved capital efficiencies going forward."

NAL Energy's president and chief executive Andrew Wiswell said: "Bringing Pengrowth and NAL together provides the combined company with greater size, liquidity and access to capital. Part of the attraction to us is Pengrowth's commitment to its dividend paying business model.

"This transaction provides NAL shareholders with exposure to a larger entity with an excellent portfolio of unbooked light oil development opportunities at Swan Hills and in the central Alberta Cardium play, in addition to a substantial long-term growth asset like the Lindbergh SAGD project."

Pengrowth is an intermediate Canadian producer of oil and natural gas. Its focus is on the development of conventional and unconventional resource-style plays in the Western Canadian Sedimentary Basin.

The company's projects include the Swan Hills light oil play in north-central Alberta, the Olds light oil and gas play in south-central Alberta, the Lindbergh Steam Assisted Gravity Drainage (SAGD) project in east-central Alberta and the Groundbirch gas play in north-eastern British Columbia.

NAL Energy acquires, produces and sells crude oil, natural gas and natural gas liquids from assets based in southeastern Saskatchewan, central Alberta, and northeastern British Columbia.

Amongst the benefits that a combination of both businesses bring are an expanded asset base of high quality conventional and unconventional opportunities with over 100,000 barrels of oil equivalent (boe) per day of current production and 434 million boe of proved plus probable reserves using Pengrowth and NAL's year-end 2011 reserves.

This represents an approximate 12-year reserve life index.

The transaction gives exposure to leading western Canadian light oil plays with an inventory of over 730 locations across the Swan Hills Trend, the central Alberta Cardium and southeast Saskatchewan. The operating scale achieved in these areas will allow Pengrowth greater flexibility to further consolidate these areas, the company said.

Friday's deal will also provide increased access to capital to fund Pengrowth's Lindbergh SAGD oil sands project. Lindbergh is estimated to contain 783 million barrels of bitumen and a 1,000 barrels per day pilot project is currently in the process of injecting steam.

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