Petronas to buy Progress Energy for RM14.9b
UPDATED @ 09:45:35 PM 28-06-2012
TORONTO, June 28 – Malaysia’s state oil company today agreed to buy Canada’s Progress Energy Resources Corp for C$4.8 billion (RM14.93 billion) to bolster its reserves of natural gas for export to Asian markets.
The deal by Malaysia’s Petronas follows its formation of a joint venture with Progress last year to develop a part of Progress Energy Resources Corp’s Montney shale assets in the foothills of northeastern British Columbia. Progress owns shale fields in the provinces of British Columbia and Alberta.
The two companies, which have been studying the feasibility of a new liquefied natural gas terminal on Canada’s West Coast as a way to secure higher prices for shale gas, outlined plans to build a terminal in Prince Rupert, British Columbia.
North American gas prices have remained stubbornly weak due to static domestic demand and the rapid development of shale supplies throughout Canada and the United States.
“Our asset base requires extensive capital to develop,” Progress Energy’s Chief Executive Michael Culbert said in a release. “Petronas offers the size and scale that will enable our company to continue to grow and not be limited by the same cash flow challenges faced by many producers in the North American natural gas market today.”
Petronas said its Canadian subsidiary, Petronas Carigali Canada Ltd, would pay C$20.45 for each share of the Calgary-based gas producer – a 77 per cent premium to Progress Energy’s closing yesterday. Including debt, the deal is valued at about C$5.5 billion, the companies said.
“The proposed transaction will combine Petronas’ significant global expertise and leadership in developing LNG infrastructure with Progress’ extensive experience in unconventional resource development to build a strong and growing, world-class energy business based in Canada,” Datuk Anuar Ahmad, head of the gas and power business for Petronas, said in a statement.
In April, Progress denied it was in talks with Petronas, after news emerged that it was considering a proposal to buy the Canadian natural-gas producer.
Last year Petronas paid C$1.07 billion for a half interest in shale-gas fields owned by Progress, and the two pledged to study the feasibility of exporting liquefied natural gas to Asia.
Other Asian players such as PetroChina , Korea Gas and Mitsubishi are also venturing into North American shale gas plays and finding willing partners that are in desperate need for capital to fund growth.
Several players, including Apache Corp and Royal Dutch Shell, are eyeing LNG terminals on the Canada’s Pacific Coast as a way to absorb burgeoning output from the Montney and Horn River areas.
Progress’ shares closed at C$11.55 yesterday on the Toronto Stock Exchange, near the midpoint of their trading range over the past 52 weeks.
NET BENEFIT
The deal will need to win the approval of Progress Energy’s shareholders, antitrust authorities and the Canadian federal government, which has the authority to review whether such deals are of “net benefit” to the country.
In 2010, Canada vetoed mining giant BHP Billiton’s US$39 billion (RM124.68 billion) bid for the world’s top fertilizer producer Potash Corp, arguing that the deal was not of ‘net benefit’ as based on the provisions of the Investment Canada Act.
Mindful of this hurdle, Petronas attempted to highlight some of the benefits that this acquisition would provide to Canada.
“This development will generate substantial economic benefits for the provinces and local communities,” Ahmad said in the statement. “Petronas’ access to capital will help to bring Canada’s abundant and clean-burning natural gas resources to global markets, leveraging our well-established and extensive network of customers worldwide.”
Petronas said it plans to combine its Canadian business with that of Progress and retain all of Progress’ employees to capitalize on the experience and depth of the company’s team.
The Malaysian company said it remains committed to fostering strong community relations and building on Progress’ existing community and charitable commitments. – Reuters
