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CALGARY, Alberta (Reuters) - Shares of Encana Corp (ECA.TO), Canada's largest natural gas producer, rose as much as 7.8 percent on Thursday after Malaysia's state oil company said it will buy Encana rival Progress Energy Resources Corp PRQ.TO for a rich premium.
Shares of Encana were up C$1.5, or 5.3 percent, at C$20.80 by late morning on the Toronto Stock Exchange after touching as high as C$21.29. Earlier in the week the stock had been battered by a Reuters report that Encana had worked with Chesapeake Energy Corp CHK.N to lower land prices at a promising Michigan oil and gas field, and by an ill-received decision to boost capital spending.
Thursday's jump came after Malaysia's Petroliam Nasional Bhd PETR.UL, better known as Petronas, said it will buy Progress Energy for C$4.8 billion ($4.6 billion), offering C$20.45 for each share of the Calgary-based gas producer, a 77 percent premium to Progress's Wednesday close.
The rich offer was made to gain control of Progress's shale and unconventional gas fields in Western Canada, including those that Petronas bought a stake in last year.
The bid caused investors to rethink the values given to Encana and other Canadian companies that control vast shale gas fields in northeastern British Columbia and Alberta containing trillions of cubic feet of natural gas.
The offer "is multiples above where most of the gas names were trading," said Michael Dunn, an analyst at FirstEnergy Capital. "A 77 percent premium is such an outlier to where these stocks are being valued."
Other gas producers on the Toronto Stock Exchange had sharp gains on Wednesday: Arc Resources Ltd ARX.TO was up C$1.35, or 6.6 percent, at C$21.77, while Bonavista Energy Corp BNP.TO rose 75 Canadian cents, or 5.1 percent, to C$15.49, and Advantage Oil & Gas Ltd AAV.TO climbed 18 Canadian cents, or 6.4 percent, to C$2.99.
Reporting by Scott Haggett; Editing by Peter Galloway