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Pan-Ocean Energy Corp. Ltd. -- once a humble domestic natural gas producer, and now an international oil explorer -- is selling itself to Addax Petroleum Corp. for $1.6-billion in cash.

Addax, the leading independent producer of oil in Nigeria, is acquiring oil properties in Gabon that are controlled by the two subsidiaries that make up Pan-Ocean.

Addax said the acquisition is expected to boost its production by 25 per cent to 100,000 barrels a day, a figure that could rise to more than 130,000 b/d next year.

Pan-Ocean is headed by chairman David Lyons, a Calgary-born oilman, who ran Pan-Ocean predecessor Ocelot Energy Inc. in the 1990s. Ocelot was founded in the 1970s by Mr. Lyons' father, Verne, an industry pioneer who drilled for natural gas in the Western Canada Sedimentary Basin.

Under David Lyons' leadership, Ocelot began to look overseas, and in 1999 decided to sell its Canadian holdings to focus on its international business.

"It's not that we don't like Western Canada," Mr. Lyons told The Globe in March, 1999. "It's just that we've put together a portfolio of higher-quality projects elsewhere."

Earlier this year, Pan-Ocean hired financial advisers because the company felt its stock price didn't adequately reflect the value of its assets, chief financial officer Robert Wynne told Bloomberg News. Several companies submitted bids.

Pan-Ocean, which is listed on the Toronto Stock Exchange, has its headquarters in Jersey, one of the Channel Islands between France and England. Addax, also listed on the TSX, having gone public earlier this year, is controlled by privately held Addax & Oryx Group of Geneva.

Pan-Ocean's current production is about 10,000 b/d, Addax said, a figure expected to reach about 18,000 by year-end. Given the current drilling program, Addax said Pan-Ocean's 2007 production could exceed 30,000 b/d.

Addax stock rose 15 cents yesterday to $28.15, more than 40 per cent higher than its initial public offering price of $19.50. The company raised $450-million in its IPO.

Class B shares of Pan-Ocean climbed $4.79 or 9 per cent yesterday to $57.99. Addax is offering $58.50 for each class B share. The class A stock, which changed hands at $57.01 on its latest trading day, did not trade yesterday. Addax is offering $65.80 for each class A share, almost all of which are controlled by Mr. Lyons.

Pan-Ocean said that the deal is subject to approval by a three-quarters majority of holders of Pan-Ocean class A and class B shares, with each class voting separately. A majority of the minority holders in each class is also required.

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