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CALGARY, Alberta/SYDNEY (Reuters) - Canadian heavy oil producer Baytex Energy Corp BTE.TO has agreed to buy Aurora Oil & Gas Ltd AUT.AX for C$2.6 billion ($2.4 billion) including debt, targeting the Australian company's Texas shale oil assets and driving its shares to a 15-month high.
Baytex is offering A$4.10 for each share of the Perth-based oil producer, a 52 percent premium to its average price in the past week, valuing the company at A$1.84 billion ($1.65 billion), Aurora said in a statement.
Baytex said it would pay C$1.8 billion for the shares and assume C$744 million of Aurora's long-term debt.
"The deal looks very good ... very healthy premium, and obviously on a number of multiples looks very attractive for Aurora shareholders," Bank of America Merrill Lynch analyst James Bullen said in Sydney.
The acquisition is the largest in Baytex's 20-year history and broadens the company beyond its focus on conventional heavy oil from reserves in Western Canada and its emerging light oil output from the Bakken shale field in North Dakota.
It will give Baytex access to Aurora's 22,200 acres of exploration lands and 166.6 million barrels of reserves in the Sugarkane field in south Texas, which Baytex says lies in the heart of the Eagle Ford region.
"Baytex will acquire premier acreage in the core of the Eagle Ford, one of the leading shale oil plays in the (United States)," James Bowzer, Baytex's chief executive, said in a statement.
Shale oil is rapidly emerging as a low-cost new unconventional energy in the United States. Eagle Ford ranks as one of the largest oil-and-gas developments in the world based on capital invested and has over 200 rigs running.
Some projections suggest producers will eventually recover more than 25 billion barrels of oil equivalent and the growth of shale oil has helped U.S. oil production rise to a 25-year high.
Aurora shares jumped as much as 56 percent on Friday to a 15-month high of A$4.09, and last traded at A$4.08 at 0127 GMT. The share price is slightly below Baytex's offer, implying the market expects the deal to proceed.
Aurora said its board had unanimously recommended the offer in the absence of a superior proposal. Its shareholders are expected to vote on the offer in April or May.
The deal could spur further interest in Aurora's sought-after assets in Texas, Rivkin Securities director Shannon Rivkin said in Sydney.
"My guess is that this could potentially put Aurora in play even if it looks like it's a pretty good price," he said.
A banker close to the deal declined to comment on whether there would be other bidders.
Aurora produces 24,678 barrels of oil equivalent per day, less than half the 57,100 boepd Baytex produced last year.
"There is obviously quite a large disconnect between how the Australian market has been valuing these companies, and what the U.S. or North American corporates seem to be willing to pay," Bullen of Bank of America Merrill Lynch said, noting that Baytex could use Aurora's assets to fill gaps in its portfolio.
Boosted by Aurora's rally, Australian energy producers AWE Ltd AWE.AX and Karoon Gas Australia Ltd (KAR.AX) jumped 7.2 percent and 6.3 percent respectively.
Baytex shares rose 47 Canadian cents to C$41.63 before being halted on the Toronto Stock Exchange late on Thursday. The deal was announced after markets closed.
Baytex will fund the takeover in part with a C$1.3 billion share issue underwritten by Scotiabank and RBC Capital markets, while Aurora is advised by Credit Suisse and Goldman Sachs.
($1=$1.11 Canadian) ($1 = 1.1159 Australian dollars)
Editing by Peter Galloway, Richard Pullin and Stephen Coates