Beau Canada Exploration Ltd. has found itself a buyer in U.S.-based Murphy Oil Corp., which has offered $198-million in cash for the company.
Under the offer, unveiled yesterday after stock markets closed, the mid-sized oil and gas producer from Arkansas would pay $2.15 for each of Beau's 92 million shares outstanding. Murphy will also assume $183-million in debt.
The offer represents a 27-per-cent premium on Beau's closing price of $1.69 yesterday on the Toronto Stock Exchange.
Calgary-based Beau, a small oil and gas producer with operations largely based in Western Canada, put itself on the auction block in late April because of pressure from investors lobbying for better stock performance. Its board has unanimously supported Murphy's offer.
Analysts said the key for Murphy to the Beau acquisition is Beau's 30-per-cent stake in the Ladyfern/South Hamburg natural gas project in northwestern Alberta and northeastern British Columbia. Eldorado-based Murphy already owns 33 per cent of the project and is the operator. Houston-based Apache Corp. owns the other 37 per cent.
"There's a tremendous amount of upside to this project," said Brian Prokop, an analyst at Peters & Co. in Calgary. He said the purchase price is a bit high, compared with other recent acquisitions in Canada's energy sector, but Murphy's knowledge of the potential of the Ladyfern/South Hamburg assets made the difference.
Analyst Michael Spohn at Petroleum Research Group said the deal gives Murphy a stronger foothold in the Western Canada natural gas business, seen as a key growth area for the North American oil and gas sector. "It would at least double their assets there."
Referring to Beau's properties, Murphy chief executive officer Claiborne Deming, said: "Current producing properties present numerous cost-saving opportunities through synergies and economies of scale, while an attractive array of exploration prospects offer significant future growth potential."
Murphy shares, which trade on the New York Stock Exchange, fell 2.3 per cent to $61.75 (U.S.) prior to the announcement.
Beau chairman Bruce Libin said the company had many interested suitors, but didn't receive a price it found acceptable until now.
Earlier this year, Beau cut its staff from 90 to 65 people. It also sold gas properties in British Columbia and Alberta for a total of about $90-million to reduce its debt load.
The offer is conditional on at least two-thirds of Beau's common shares being tendered.
As part of the agreement, Beau Canada must stop soliciting bids. It may also have to pay $10-million to terminate the agreement.
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