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Petronas Adds C$500M to Progress Energy Bid

Malaysian national oil company Petronas has increased to approximately C$6 billion its bid for Progress Energy Resources Corp. in a deal that would create a company that would deliver Canadian natural gas to world markets, Progress said. The amended offer was made in an effort to block an unsolicited proposal from another company.

In June Petronas said it would combine its liquefied natural gas (LNG) expertise with the unconventional resources abilities of Calgary-based Progress by acquiring Progress in a deal worth C$5.5 billion including debt (see NGI, July 2).

Petronas, which previously said it would pay C$20.45/share, has agreed to pay C$22/share. Petronas will also acquire all outstanding 5.25% Convertible Unsecured Subordinated Debentures of Progress due Oct. 31, 2014 and 5.75% Series B Convertible Unsecured Subordinated Debentures of Progress due June 30, 2016, Progress said.

"The increase in the consideration resulted from Progress having received an unsolicited proposal from a third party," the company said.

The initial proposed deal allowed Progress to consider and accept a better offer and granted Petronas the right to match it. If Progress takes another offer or under certain other circumstances, Petronas would be entitled to a termination payment of C$150 million.

The Board of Directors of Progress has unanimously approved the amended arrangement and recommended that shareholders approve it at a special meeting scheduled to be held in Calgary, AB Aug. 28. The deal is expected to be completed by Sept. 25, assuming governmental and regulatory approvals.

Petronas has said it would retain all Progress employees "to capitalize on the experience and depth of the Progress team." The combined company's Canadian upstream operations would remain based in Calgary with an LNG office in Vancouver, BC.

Just over a year ago Progress established a joint venture in the Montney Shale in the Foothills of northeast British Columbia (BC) with Petronas, with the latter acquiring a half interest in Progress' Atares, Lily and Kahta properties. Development of LNG export capability was also being explored then (see NGI, June 6, 2011).

Progress is focused on exploration, development and production of large, unconventional natural gas resources in northeast BC and northwest Alberta. Progress holds the largest position in the Montney Shale with 825,000 net acres, while Petronas holds almost 75,000 acres in the play, according to company reports. Other major leaseholders in the Montney include Canadian Natural Resources (766,000 acres), Guide Exploration (604,000 acres), Celtic Exploration (545,206 net acres) and Encana (435,000 net acres).

Petronas is engaged in the oil, gas and petrochemicals industries with assets and interests in more than 30 countries. It is one of the world's leading LNG companies and is involved in every value chain of the LNG business, from liquefaction and shipping to re-gasification and trading. Apart from its Malaysian production facility, currently one of the world's largest, Petronas also owns interests in LNG assets in Australia and Egypt.

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