Skip to main content

Pumpjack at horizontal Cardium well

Yangarra Resources Ltd.

China Oil and Gas Group Ltd. is buying a private Canadian energy company for $236-million in what has become a trend in Asian buyers launching takeovers for small firms since the Harper government imposed tougher rules on deals in late 2012.

China Oil and Gas, a natural gas distributor as well as an operator of LNG plants and compressed natural gas-filling stations in China, is buying Calgary-based Baccalieu Energy Inc., which put itself on the auction block early this year.

Baccalieu operates in west-central Alberta, concentrating on uncoventional oil and gas operations in a formation known as the Cardium.

Story continues below advertisement

Its senior executives, including chief executive officer Aidan Walsh and chief financial officer Scott Dyck, have agreed to stay on for at least two years to keep developing the business, China Oil and Gas said.

There have been only a handful of takeovers by foreign companies in the Canadian oil patch since Ottawa essentially closed the door on acquisitions of controlling interests in the oil sands by state-owned foreign firms when it approved the $15.1-billion takeover of Nexen Inc. by CNOOC Ltd. 19 months ago.

The more stringent investment regulations put no new limits on buying energy assets outside the northern Alberta oil sands, the third-largest crude reserves in the world. However, some investment bankers have said that the restrictions have scared off potential investors in other energy plays as well.

Nick Johnson, managing director of corporate finance at FirstEnergy Capital Corp., Baccalieu's financial adviser, said he has not seen that. His firm has been involved in three recent deals involving foreign buyers for Canadian energy assets.

Interest among Asian buyers remains, though the preference is for light-oil plays, such as those operated by Baccalieu, Mr. Johnson said.

"It's the cash flow, it's the earnings," he said in an interview. "The LNG proposition is still a few years out, so it's harder to secure the reserves today because of the discount factor. If you have to buy the company today and you can't export the product for a number of years, it's more difficult to come to a value proposition."

China Oil and Gas, listed on the Hong Kong Stock Exchange, is scooping up a company that produced 4,244 barrels of oil equivalent a day in the first quarter of this year. Two-thirds of that was oil and gas liquids and the remainder natural gas. In 2013, it earned $20-million on revenue of $74.7-million.

Story continues below advertisement

Baccalieu has stakes in 469 square kilometres in the Pembina, Ferrier, Sylvan Lake and Harmattan areas of west-central Alberta, where its proved and probable reserves are pegged at 22 million barrels of oil equivalent.

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter
To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies