ARC Energy Trust will buy Storm Exploration Inc. in a deal worth $680-million in shares and debt, to add a key property in the promising Montney unconventional gas field in Western Canada.
Under the terms of the agreement, announced early Thursday, each Storm shareholder can elect to receive either 0.5700 of an ARC unit or, 0.2021 of an exchangeable share of Arc Resources Ltd.
Storm's properties in the Horn River shale gas field in northern British Columbia, Canada's biggest shale gas play, will be spun off into a new company. Storm shareholders will receive one-third of share in the Horn River venture for each Storm share, as well as a special payout of $1 a share from Storm, which is distributing the proceeds of an asset sale.
ARC, Canada's No. 2 conventional oil and gas trust, is looking to add reserves and production from the Montney field, a shale and tight sands gas field that straddles the Alberta-British Columbia border.
"We are delighted to have been able to acquire such a focused, resource-rich company whose prime asset is such an excellent strategic fit for ARC," John Dielwart, ARC's chief executive officer, said in a statement.
"The addition of the Parkland field, when combined with our existing developments at Dawson and Sunrise/Sunset, provides ARC with three of the highest-quality Montney fields."
Along with Storm's Parkland field, ARC will add 9,861 barrels of oil equivalent per day of natural gas and natural gas liquids, as well as exploration lands and reserves estimated at 43.2 million barrels.
To pay for its acquisition ARC will issue about 28.4 million units and assume $90-million of total debt.
Storm's board, advised by FirstEnergy Capital Corp, has unanimously accepted the deal. Storm shareholders will be asked to approve the deal, expected to close on or before Aug. 17, the companies said.
As a result of the planned purchase, ARC raised its total production forecast for the full year to a range of 72,500 barrels of oil equivalent per day (boe/d) to 74,500 boe/d from its prior forecast of 70,500 to 72,500 boe/d.