July 12, 2010 / 5:04 PM / 7 years ago

Pengrowth Energy Trust to buy Monterey for $336 million

BANGALORE (Reuters) - Canada’s Pengrowth Energy Trust said it agreed to buy the 82 percent it does not already own in Monterey Exploration Ltd for about C$336 million ($325.6 million), to get access to gas reserves in northeast British Columbia.

Units of Pengrowth, which expects the deal to add to its production, reserves and cash flow on a per unit basis by 2012, fell as much as 9 percent to C$9.40 Monday morning on the Toronto Stock Exchange.

“The transaction will have a negative contribution to its earnings in the next couple of years and that is why the stock is trading down,” analyst Kyle Preston of Canaccord Genuity said.

Monterey, a junior oil and natural gas company, is a developer of gas reserves from the Montney formation in the Groundbirch area of northeast British Columbia.

Monterey’s expected 2010 and 2011 exit production is 6,000 barrels of oil equivalent per day (boe/d) and 10,000 boe/d, respectively, driven by development of the Montney area.

“Pengrowth has talked about having good short-term prospects and some very good long-term prospects. This deal gives it some mid-term prospects that it needed,” analyst Menal Patel of National Bank Financial said.

Pengrowth expects to spend an additional C$65 million through 2010 to drill six net wells in Monterey’s lands, bringing its 2010 capital program to C$350 million.

“The transaction gives us exposure to a large financially strong entity with significant liquidity,” Monterey Chief Executive Patrick Manuel said.

Pengrowth said it will also assume C$30 million of Monterey’s net debt as at June 30.


The deal, expected to close in mid-September, values Monterey at C$8.30 per share, representing a premium of 94 percent to the stock’s Friday close of C$4.28.

Pengrowth said including its existing 18 percent stake in Monterey, which it acquired for C$9 million, the total transaction is valued at about C$375 million.

Under the deal, each Monterey shareholder may choose to receive either 0.8298 of a Pengrowth Energy Trust unit or 0.8298 of an exchangeable share of Pengrowth Corp, the administrator of Pengrowth Energy Trust.

Each exchangeable share of Pengrowth Corp can be exchanged for one Pengrowth Energy Trust unit.

Pengrowth units were down 79 Canadian cents at C$9.49 in afternoon trade. Monterey shares were up 78 percent at C$7.63.

Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Anne Pallivathuckal

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