San Francisco-based URS Corp. has agreed to buy Calgary-based Flint Energy Services Ltd. in a $1.25-billion deal that highlights the growing global interest in Canada’s oil sands.
The $25-a-share friendly deal offers a 70-per-cent premium to Flint’s 30-day weighted average, and comes amid a surge in continent-wide oil and gas production that is drawing new players into the sector.
“It’s obvious to all that we’re moving towards North American energy independence, and servicing the corporations that are a part of that is a good market opportunity for us,” URS chief executive officer Martin Koffel said in an interview Monday.
The deal comes as Canada’s oil sands face a period of extraordinary growth that will see a constant flow of billions of dollars push production from 1.6 million barrels a day today to three million by 2020.
“When you’re looking out 10 years and seeing there’s going to be somewhere in the magnitude of $180-billion in capital projects going forward, it gets peoples’ attention as being an area where they want to be participating,” Flint CEO Bill Lingard said.
For Flint, access to a major U.S. engineering company, which expects $10-billion in 2012 revenue, comes at a time when talent has become increasingly stretched in Alberta.
“There [have]been shortages on engineering and environmental services, and various things that clients would like to have,” Mr. Lingard said. “ [The deal]gives our clients more access to things they need to be able to build out their projects.”
Canada’s oil sands have become a magnet for substantial foreign spending, with multibillion-dollar investments flowing in from Asia, Europe and elsewhere. Much of that spending has been to secure land, and the barrels of oil it contains. The Flint deal signals the value overseas acquirers also see in servicing that production.
With 10,000 employees, Flint builds well pads, moves drilling rigs, makes processing equipment and installs pipelines. It erects and maintains large new oil sands plants, and has worked on numerous important projects in the Fort McMurray area, including Royal Dutch Shell PLC’s Albian Sands, Nexen Inc.’s Long Lake, Statoil ASA’s Leismer, ConocoPhillips Co.’s Surmont development, and Cenovus Energy Inc.’s Foster Creek. About 80 per cent of Flint’s revenue today comes from Western Canadian oil and gas; half of that is from the oil sands.
URS is an engineering and services firm that has specialized in infrastructure, transportation, water and facilities for both the private and public sectors. It has gained some exposure to the oil sands by, for example, working on a power cogeneration plant for Suncor Energy Inc.’s Firebag project.
The two companies were formally introduced last September when Mr. Koffel requested a meeting at an investment conference in San Francisco.
“We’d been attracted to Flint for some time,” he said. “Our strategic plan was to expand in oil and gas, and we’ve been very attracted to the oil sands and other unconventional oil and gas markets in Canada.”
Flint, he added, brought scale, customer relationships, and technical know-how.
A formal offer was made around Christmas, after several more meetings between the two chief executive officers. The deal was finalized Monday in New York.
Flint was formed in 1998 as a private corporation that brought together a series of construction and welding companies. It went public in 2001. The company’s executive team is expected to remain in place to manage a new oil and gas division for URS that will be called URS Flint.
Under the terms of the deal, URS has five days to match any better offer, and Flint is subject to a $42-million break fee. The deal will also see URS take on $225-million in Flint debt.