Shell Agrees To Buy Alberta's Duvernay Oil For C$5.9 Billion
July 14, 2008
In 2006, Shell Canada, which already operates the giant Athabasca oil project, already acquired Alberta's oil sands producer BlackRock Ventures Inc. for C$2.4 billion. And in December, BP PLC (BP) took its first plunge into oil sands, when it agreed to a $5.5 billion asset swap and investment plan with Husky Energy Inc. (HSE.T).
July 14, 2008: 11:28 AM EST
(Updates more background.)
By Benoit Faucon
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- Royal Dutch Shell PLC (RDSB.LN) Monday agreed to buy Duvernay Oil Corp. (DDV.T) for C$5.9 billion ($5.85 billion), as oil majors turn their attention from Canada's heavy oil to its gas riches.
The offer also underscores how large oil and gas companies are intensifying the scramble for new sources of natural gas, the price of which is now following the trail of skyrocketing crude oil.
The cash bid of C$83 per share, made through Shell Canada Ltd., has been unanimously recommended by Duvernay's board, the Anglo-Dutch oil giant said. The price represents a 42% premium over Calgary-based Duvernay Oil's closing price of C$58.44 a share on Friday.
Directors and officers of Duvernay have entered into lock-up agreements pursuant to which they have agreed to tender their shares representing 18.1% of the fully diluted share capital.
Founded in 2001, Duvernay is an Alberta-based company engaged in exploration and development of natural gas and crude oil in Western Alberta and Northeastern British Columbia. It estimates that its production could grow from 20,000 barrels of oil equivalent in 2007 to some 70,000 barrels a day in 2012.
But more than short-term output prospects, Duvernay's key strength lies in its tight gas reservoirs, gas trapped in rock that isn't porous and permeable enough to let molecules flow through it easily.
Tight gas - like other non-conventional, hard-to-extract forms of hydrocarbons - is now increasingly coveted by oil majors due to skyrocketing oil and gas prices and technical advances.
In the second quarter of this year, U.S. natural gas contracts stood at $11.8 per million British thermal units in the quarter, a 33% rise from $8.85 per million British thermal units in the first three months of the year.
Shell is already a significant player in North American tight gas, with positions in Western Canada, Wyoming and in South Texas producing 80,000 boe/d.
Shell's Chief Executive Jeroen van der Veer said: "The combination of Duvernay's acreage with Shell's proven operating experience and financing capabilities make this transaction attractive to all shareholders."
International oil companies have been battling to acquire non-conventional hydrocarbon resources in Canada's Western province of Alberta.
But Shell's focus on Alberta's unconventional gas is a shift from the majors' previous interest in the region's oil sands - a heavy, bitumen-like substance that is tricky and expensive to process.
In 2006, Shell Canada, which already operates the giant Athabasca oil project, already acquired Alberta's oil sands producer BlackRock Ventures Inc. for C$2.4 billion. And in December, BP PLC (BP) took its first plunge into oil sands, when it agreed to a $5.5 billion asset swap and investment plan with Husky Energy Inc. (HSE.T).
But Shell setting its sights on Canadian tight gas emulates an increasing appetite for new forms of natural gas worldwide.
In April, Exxon Mobil Corp. of the U.S. (XOM) bought into a venture hoping to tap the Mako tight gas reservoir in Hungary, in a $300 million deal.
In Australia, U.K. gas giant BG Group PLC (BG.LN) is embroiled in a A$13.8 billion hostile bid on Origin Energy Ltd. (ORG.AU) as it tries to seize control of its coal seam gas, methane gas trapped underground by water in deep coal seams.
The Duvernay deal is also a consolation for Shell after it was bypassed by ConocoPhillips (COP) last week in a multi-billion Abu Dhabi deal to extract sour gas. Sour gas a highly corrosive gas and requires special facilities, equipment and handling to process.
The announcement contributed to a slight share price drop for Shell. At 1446 GMT, Shell shares were down 0.73%, or 14p, at 1,905p. Duvernay's shares were up 40.4%, or C$23.6, at C$82.1.
Company Web site: http://www.shell.com
-By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266; benoit.faucon@ dowjones.com
(Updates more background.)
By Benoit Faucon
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- Royal Dutch Shell PLC (RDSB.LN) Monday agreed to buy Duvernay Oil Corp. (DDV.T) for C$5.9 billion ($5.85 billion), as oil majors turn their attention from Canada's heavy oil to its gas riches.
The offer also underscores how large oil and gas companies are intensifying the scramble for new sources of natural gas, the price of which is now following the trail of skyrocketing crude oil.
The cash bid of C$83 per share, made through Shell Canada Ltd., has been unanimously recommended by Duvernay's board, the Anglo-Dutch oil giant said. The price represents a 42% premium over Calgary-based Duvernay Oil's closing price of C$58.44 a share on Friday.
Directors and officers of Duvernay have entered into lock-up agreements pursuant to which they have agreed to tender their shares representing 18.1% of the fully diluted share capital.
Founded in 2001, Duvernay is an Alberta-based company engaged in exploration and development of natural gas and crude oil in Western Alberta and Northeastern British Columbia. It estimates that its production could grow from 20,000 barrels of oil equivalent in 2007 to some 70,000 barrels a day in 2012.
But more than short-term output prospects, Duvernay's key strength lies in its tight gas reservoirs, gas trapped in rock that isn't porous and permeable enough to let molecules flow through it easily.
Tight gas - like other non-conventional, hard-to-extract forms of hydrocarbons - is now increasingly coveted by oil majors due to skyrocketing oil and gas prices and technical advances.
In the second quarter of this year, U.S. natural gas contracts stood at $11.8 per million British thermal units in the quarter, a 33% rise from $8.85 per million British thermal units in the first three months of the year.
Shell is already a significant player in North American tight gas, with positions in Western Canada, Wyoming and in South Texas producing 80,000 boe/d.
Shell's Chief Executive Jeroen van der Veer said: "The combination of Duvernay's acreage with Shell's proven operating experience and financing capabilities make this transaction attractive to all shareholders."
International oil companies have been battling to acquire non-conventional hydrocarbon resources in Canada's Western province of Alberta.
But Shell's focus on Alberta's unconventional gas is a shift from the majors' previous interest in the region's oil sands - a heavy, bitumen-like substance that is tricky and expensive to process.
In 2006, Shell Canada, which already operates the giant Athabasca oil project, already acquired Alberta's oil sands producer BlackRock Ventures Inc. for C$2.4 billion. And in December, BP PLC (BP) took its first plunge into oil sands, when it agreed to a $5.5 billion asset swap and investment plan with Husky Energy Inc. (HSE.T).
But Shell setting its sights on Canadian tight gas emulates an increasing appetite for new forms of natural gas worldwide.
In April, Exxon Mobil Corp. of the U.S. (XOM) bought into a venture hoping to tap the Mako tight gas reservoir in Hungary, in a $300 million deal.
In Australia, U.K. gas giant BG Group PLC (BG.LN) is embroiled in a A$13.8 billion hostile bid on Origin Energy Ltd. (ORG.AU) as it tries to seize control of its coal seam gas, methane gas trapped underground by water in deep coal seams.
The Duvernay deal is also a consolation for Shell after it was bypassed by ConocoPhillips (COP) last week in a multi-billion Abu Dhabi deal to extract sour gas. Sour gas a highly corrosive gas and requires special facilities, equipment and handling to process.
The announcement contributed to a slight share price drop for Shell. At 1446 GMT, Shell shares were down 0.73%, or 14p, at 1,905p. Duvernay's shares were up 40.4%, or C$23.6, at C$82.1.
Company Web site: http://www.shell.com
-By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266; benoit.faucon@ dowjones.com