Shell to pay $5.6B for Duvernay
Three-month TSX trading in Duvernay.
Shell Canada is laying out about $5.6 billion cash to buy Duvernay Oil Corp., a Calgary-based conventional gas and oil exploration and production company.
Shell will pay $83 a share, 42 per cent over Duvernay's close Friday of $58.44, and 36 per cent above the average price on the TSX in the previous 20 days, Duvernay said in a release Monday.
Duvernay stock rose to $82.00, up $23.56 in TSX trading.
Shell will also take on the company's debt, boosting the total value of the deal to about $5.9 billion, the company said.
Duvernay is a relatively small company, producing the equivalent of about 27,000 barrels of oil a day in May, mostly natural gas. Its first-quarter revenue was $55 million, net of royalties and a $40 million unrealized loss of financial instruments.
Royal Dutch Shell, which owns Shell Canada, said in a release that Duvernay is heading towards production of 72,000 barrels of oil equivalent a day by 2012. The company has 1,800 square kilometres of landholdings in Western Canada, including positions in the emerging Montney, B.C., tight gas trend.
Tight gas is natural gas which is difficult to produce because it's trapped in impermeable rock. Shell has the technology and money to extract the gas, a spokesman said.
Duvernay's board unanimously approved the deal.
The company's officers and directors, who hold about 18.1 per cent of the stock, have agreed to tender their shares.
It will pay Shell a break fee of $120 million if the deal doesn't go ahead.
The Caisse dépôt et placement du Québec owns just over 10 per cent of the stock, a securities filing said.
The company focuses on working in the deeper, western portion of the Western Canadian Sedimentary Basin in Alberta and northeastern British Columbia.
Its main operating areas are Sunset-Groundbirch, B.C., and Wild River-Sundance-Fir, Apex of the Peace River, and Dawson-Puskwaskau-Smoky, all in Alberta.
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