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A photo illustration of natural gas pipelines.

Getty Images/iStockphoto

First went Progress Energy Resources Corp., now goes Celtic Exploration Ltd. It seems like everyone but Canadians see long-term value in our country's natural gas reserves.

Until Exxon Mobil Corp. announced that it would buy Celtic on Wednesday morning, shareholders had fled Celtic in droves. The company's stock was down 25 per cent over the past year, and the shares' 52-week trading range was between a very wide $11 and $27 per share.

The same was true for Progress before it was bid on by Petronas. In the year before that deal was announced, Progress shares fell by 16 per cent.

Story continues below advertisement

The key point, however, is that much of these drops stemmed from weaker natural gas prices, rather than poor operations. At the end of last quarter, Celtic's funds from operations were down almost one-third from the same period in 2012, even though production volumes rose.

In the second quarter of 2012, natural gas prices averaged about $2.06 per thousand cubic feet. The year prior, the average was $4.32. Given such a drastic drop, Celtic, a predominantly natural gas company, earned 90 per cent of its operating income from oil and liquids that accounted for only 21 pr cent of production.

Of course, beyond natural gas prices, Celtic has its worries. The firm just recently revised its average production rate slightly downward because it can't bring new wells onstream as fast as it would like.

But prices are clearly the dominant factor weighing on stock prices, and that allows bigger players to come in and scoop these players up for cheap.

Should the deal be approved by shareholders, Celtic's management team will quickly move on to a new adventure with assets that currently produce about 3,300 barrels of oil equivalent a day, 90 per cent of which is gas. That firm is likely to raise about $12-million in a private placement with officers and directors.

FirstEnergy Capital Corp. and RBC Dominion Securities offered fairness opinions to Celtic, and Borden Ladner Gervais acted as legal counsel.

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