March 23, 2012 / 11:59 AM / 5 years ago

Pengrowth to buy NAL Energy for C$1.3 billion, boosts light oil assets

(Reuters) - Oil and gas producer Pengrowth Energy Corp (PGF.TO) will buy NAL Energy Corp NAE.TO for about C$1.30 billion ($1.30 billion) in stock to boost its light oil properties in western Canada.

Pengrowth, which has been focusing on developing oil and liquids-rich assets, will now have access to more than 730 locations across Swan Hills, the central Alberta Cardium and southeast Saskatchewan.

“The larger inventory of high netback light oil opportunities of the combined asset base enables us to high grade our investment opportunities...,” Chief Executive Derek Evans said in a statement on Friday.

Pengrowth, which would acquire two new light-oil plays in Alberta and Saskatchewan from NAL, said the combined entity would produce about 100,000 barrels of oil equivalent a day.

The deal is the latest in a string of light-oil asset buyouts.

In December, Whitecap Resources Inc (WCP.TO) said it will buy Compass Petroleum Ltd to boost its light oil assets. Crescent Point Energy (CPG.TO), in January, said it would acquire Wild Stream Exploration to add assets in the oil-rich southwest Saskatchewan.

“NAL is about 50 percent oil and 50 percent gas. Natural gas assets have very low value these days, so I think it is a good price,” said analyst Gordon Currie of Salman Partners.

Pengrowth said it was paying NAL about C$67,000 per flowing boe/d of production.

Pengrowth expects the deal to also strengthen its ability to fund the Lindbergh SAGD oil sands project, which is estimated to contain 783 million barrels of bitumen.

An increasing number of North American energy companies, including second-largest U.S. natural gas producer Chesapeake Energy (CHK.N), have swerved toward oil and liquids-rich gas projects to fend off weak natural gas prices.

Calgary-based Pengrowth now expects production for 2012 of 86,000 barrels of oil equivalent (boe/d) to 89,000 boe/d, compared with its prior forecast of 74,500 boe/d to 76,500 boe/d.

The acquisition of NAL, whose production averaged 28,338 boe/d in 2011, is expected to add to Pengrowth’s funds from operation and production on per share basis.

Post closing, Pengrowth will have an enterprise value of C$6.6 billion, CEO Evans said.

The company plans to sell about 10 percent of existing non-core assets from the combined portfolio 12 to 18 months from now and use the proceeds to fund existing oil projects.

Salman Partners’ Currie expects no rival bids. “NAL has been quietly for sale for some time now and I think if there were any other bids they would have surfaced by now.”

PREMIUM DEAL

NAL shareholders will receive 0.86 of a Pengrowth share for each share held. The offer of C$8.56 per share represents a premium of about 10 percent to NAL’s Thursday closing.

NAL shareholders will own about 26 percent of Pengrowth on completion of the deal.

Including debt, the deal is valued at about C$1.9 billion.

The transaction, which is expected to close on May 31, involves a termination fee of C$45 million.

Scotiabank is advising Pengrowth, while BMO Capital Markets is NAL’s adviser.

NAL shares, which rose as much as 7 percent, was up 44 Canadian cents at C$8.24 on Friday afternoon on the Toronto Stock Exchange. Pengrowth shares were down 24 Canadian cents at C$9.71. ($1 = 1.0000 US dollars)

Reporting by Bhaswati Mukhopadhyay, additional reporting by Shounak Dasgupta in Bangalore; Editing by Sriraj Kalluvila and Gopakumar Warrier

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