Houston-based energy firm Burlington Resources Inc. said Tuesday it has launched a $3.3-billion all-cash offer for Calgary's Canadian Hunter Exploration Ltd. - a move that nearly doubles its investment in Canada and continues the U.S. push into this country's oilpatch.
Under the deal, Burlington will offer $53 a share for all of Canadian Hunter's outstanding shares.
By 12:02 p.m. EDT, Canadian Hunter stock was up more than 33 per cent or $12.96 to $51.97. The company's stock has surged recently on speculation that it could be the next takeover target.
The purchase, which is just the latest to see a major U.S. energy company pick up a player in Canada's oilpatch, gives Burlington proved reserves of 1.2 trillion feet of natural gas and 6.2 million barrels of oil, along with two million undeveloped acres of land.
"We have been studying Canadian Hunter's assets for some time, and they are the right fit with our North American natural gas strategy and our returns-based investing," Bobby Shackouls, Burlington's chairman, president and chief executive, said.
"Canadian Hunter's combination of current production, outstanding long-range potential, high working interests and its proximity to our own major production in Canada make it a crown jewel."
This year, Burlington said it expects Canadian Hunter to post average net production of 430 million cubic feet a day of natural gas and 2,700 barrels per day of oil.
Tuesday's offer has been approved by the boards of both companies.
"Burlington is a very strong exploration and production company that recognizes the value in Canadian Hunter's elite people and assets," James Gray, Canadian Hunter's co-founder and chairman, said.
"We are one of Canada's first gas-focused exploration and production companies."
Burlington's acquisition of Canadian Hunter reflects the U.S. company's continued efforts to expand outside its maturing natural gas reserve base in New Mexico and Colorado. Canadian Hunter owns about 1.5 million acres in this country's Deep Basin region, which ranks as North America's third-largest natural gas field. Natural gas comprises about 97 per cent of Canadian Hunter's production and reserves.
The purchase is expected to close late this year.
The deal, Burlington said, gives it leadership in North American natural gas, increased size and scale in the industry and broaden its exposure in terms of both natural gas basins and fields.
In 1999, Burlington bought Canada's Poco Petroleums Ltd. for $2.5-billion (U.S.) in stock.
Tuesday's deal marks the latest in a series of of deals to see a U.S. company pick up a piece of Canada's oil patch. Last month, Devon Energy Corp. agreed to buy Calgary-based Anderson Exploration Ltd. for $3.4-billion, while in May Conoco Inc. said it was purchasing Gulf Canada Resources Ltd. for $4.3-billion.
Meanwhile, Burlington said it would sell off about $500-million (U.S.) in non-core assets following the acquisition.
Mr. Shackouls told Reuters his company would also be looking at more opportunities to boost its assets in Canada. He also said the Canadian Hunter deal would immediately boost its cash flow by double digits and show similar earnings growth in couple of years.
Terry Weber