Big resource players are thinking small

Fri Aug 1, 2008 5:18pm EDT
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Acquisitive major resource companies are thinking small, and it's generating some big buzz.

Niche players in Canadian oil, gas and mining that were scarcely known outside their home base have attracted the attention of major corporations, and generated hefty takeover returns for their investors.

Case in point: Royal Dutch Shell Plc, one of the world's largest oil companies, last month offered nearly C$6 billion ($5.8 billion) for Duvernay Oil Corp to scoop up Duvernay's unconventional natural gas prospects.

That represented a fat 42 percent premium to Duvernay's stock price before Shell made the offer.

The commodities boom is expected to yield more bids as previously uneconomical resource plays -- such as the red-hot tight-gas prospects that Duvernay specialized in, or Alberta's oil sands -- become the domain of the big boys.

"Because of the high price for some of these commodities, this is something that's going to happen," said John Kinsey, portfolio manager at Caldwell Securities Ltd in Toronto.

Hundreds of junior oil and gas companies, for instance, crowd the market and many have acreage and technical expertise in such coveted areas as the Montney gas prospects in northeastern British Columbia and the Bakken oil deposits in southern Saskatchewan, Kinsey said.

"That's really quite a glut, so I think that going forward there will be mergers and acquisitions in that area," he said.   Continued...