(Adds details, analysts comments, updates shares)
* Says exploring strategic options including potential sale
* Says not yet received any offer from third party
* Shares up as much as 12 pct
By Sumit Jha
Dec 19 (Reuters) - Canada's WestFire Energy Ltd said it is exploring strategic alternatives including a potential sale, in the wake of disappointing output at its recently acquired unit Orion Oil & Gas Corp.
The news drove WestFire's stock up as much as 12 percent to C$5.45 on Monday on the Toronto Stock Exchange.
The company bought Orion to expand its presence in Viking, a sedimentary basin in Western Canada, but production from the area has failed to live up to expectations, wiping out nearly half of WestFire's market value since February when the stock touched its life-high.
"We view WestFire's announcement positively given that a potential transaction could accelerate shareholder value from its large Viking asset base," Desjardins analyst Allan Stepa said in a client note.
Analysts said the Orion buy was the main reason the board opted for a strategic review.
Stepa said the company could fetch a premium of as much as 78 percent from an outright sale.
Forest fires and flooding hurt Orion's output in the third quarter, and several wells did not resume production at previous rates.
Third-quarter production from the region was 500 barrels of oil equivalent per day lower than WestFire had originally expected.
WestFire has assets in Western Canadian prairies, including Viking light oil resource play in Redwater and Provost Alberta and West Central Saskatchewan.
The company, which has hired Cormark Securities Inc as its financial adviser, said it has not yet received any offer. (Reporting by Sumit Jha in Bangalore; Editing by Sreejiraj Eluvangal, Viraj Nair)