Saturday, September 6, 2008

Barrick grabs oil company Cadence Energy

Barrick Gold Corp. has received 94 per cent of the outstanding shares of Cadence Energy Inc., effectively snapping up the Alberta oil producer and its 3,600 barrels of daily crude production, the company said Friday.

Toronto-based Barrick, one of the world's largest gold miners, said it will move to buy the remaining Cadence shares and complete a $410 million friendly takeover which began back in June.

"The acquisition of Cadence is a key component of Barrick's long-term strategy to economically hedge oil exposure at lower rates than those available in the forward market," Barrick noted in a press release.

Barrick has been concerned for months about rising oil costs and their effect on company costs.

The usual method firms use to protect themselves against big spikes in commodity prices is to purchase options for future production, in this case crude oil, at a more economic price.

Barrick said, however, that the per-barrel price contained in these future contracts was too high and the company would be better off buying oil production outright.

So, Barrick made its $6 a share buyout offer for Cadence in June, effectively launching its new oil strategy.

Friday's announcement set the per-share for Cadence at $6.75, more than double the target's 52-week stock low of $3.37.

The deal now means Barrick can consolidate Cadence's production at Sturgeon Lake in southern Alberta with the output of Daylight Resources Trust located adjacent to Cadence's field.

Barrick bought Daylight, another smaller oil company back in August for $87.5 million.

Together the two properties will give Barrick 4,500 barrels of daily oil and oil equivalent production. The output will cover 30 per cent of Barrick's annual oil needs, the company said.



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