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AEC, PanCanadian in Merger Talks
In joint releases Friday morning, Canadian heavyweights PanCanadian Energy Corp. and Alberta Energy Co.(AEC) — the fourth and fifth largest energy companies in the country — announced they are talking about a possible merger. If completed, the company would become one of the largest natural gas producers in North America. Based on Thursday’s closing on the Toronto Stock Exchange, the companies had a market value of C$19.4 billion ($12.1 billion).
Both companies have seen their stocks rise in recent days because of merger rumors. Shares of PanCanadian rose almost 9% on Thursday to close at C$41.84, gaining C$3.41 ($2.13). Likewise, AEC rose almost 5% Thursday to stand at C$59 after gaining C$2.70. A merger of the equals would put the new company in second place revenue-wise in Canada, ahead of Petro-Canada and behind Imperial Oil Ltd., which is 70% owned by Exxon Mobil Corp.
PanCanadian had been 86% owned by Canadian Pacific Ltd. until late last year, when the railway company completed the spinoff of the unit (see Daily GPI, Sept. 7, 2001). The spinoff put PanCanadian into the top five of North American exploration companies, and also put it in a position to consider “major acquisitions,” company officials said at the time.
Natural gas has been PanCanadian’s focus, with a proven reserve base of 1,043 MMboe — 59% in gas. It also holds a huge land base in the Western Canadian Sedimentary Basin. PanCanadian also said last year that it plans to grow along the East Coast of Canada in the Sable Island region, as well as the Gulf of Mexico and the North Sea.
Last December, AEC announced it expected a total gross capital investment of approximately C$2.1 billion in 2002, while divesting at least C$400 million in non-core assets, resulting in net capital investment of C$1.7 billion next year. AEC also said last year that it was anticipating a similar range of capital investment, internally funded in 2003 and 2004, to achieve its production growth targets (see Daily GPI, Dec. 18, 2001).
Daily natural gas sales for AEC this year re expected to average between 1.525-to-1.575 Bcf, up about 15% per share from 2001. Oil production is forecast to be between 142,000-153,000 b/d, up about 8% per share. AEC said it planned to spend C$290 million for exploration activities in the company’s three growth platforms, Western Canada, the U.S. Rockies and Ecuador, and another C$205 million in new ventures in the Gulf of Mexico, the Mackenzie Delta, Alaska and overseas.
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