With buyers said to be lined up with unsolicited offers, Anadarko Petroleum Corp. announced last week it will unload profitable subsidiary Anadarko Canada Corp. for an undisclosed price. In 2005, the Canadian subsidiary provided 11% of Anadarko’s total proved reserves. Analysts expect the unit to fetch more than $4 billion.

“That’s a big piece of business,” said energy analyst Chris Theal, who co-directs research at Tristone Capital Inc. in Calgary. The deal could be the biggest in Canada’s energy sector in years, he said. Theal, who estimates the assets to sell for around $4.5 billion (C$4 billion), expects most of Canada’s large energy trusts and its largest producers, including EnCana Corp. and Talisman Energy Inc., as likely bidders.

Most of Anadarko Canada’s output is natural gas in some of the hottest Canadian plays, including the Deep Basin near Jasper National Park in Alberta and in northeastern BC. Those types of assets would interest Talisman, which is a big player in those regions, Theal said. In southeastern AB and southwestern SK, Anadarko’s shallow gas assets would interest ARC Energy Trust based in Calgary, he said.

Lower gas prices probably won’t concern potential buyers, said Theal. “I think we’re going to see buyers look through the trough in gas prices.”

Proceeds from the expected sale would be used to retire debt associated with its acquisitions of Kerr-McGee Corp. and Western Gas Resources last month (see related story). In its combined $21.1 billion offer for Kerr-McGee and Western, Anadarko will assume a total of $2.2 billion in debt: $1.6 billion for Kerr-McGee and $600 million for Western. To protect the ballooning balance sheet, Anadarko said it planned to sell off noncore assets and add natural gas hedges. The independent also plans to use cash flow, equity issuance and noncore asset sales to pay down debt by $15 billion over the next 18 to 24 months.

“Anadarko has built one of Canada’s leading natural gas operations over the past six years, and I am very proud of all that our Canadian group has been able to accomplish through exploration and high-value natural gas resource development,” said CEO Jim Hackett. “Properties like ours are in high demand in Canada right now, attracting valuations significantly above those reflected in our stock price. This arbitrage opportunity motivates us to essentially trade out of the Canadian operations and into the Kerr-McGee and Western properties.”

Anadarko gained entry into Canada in 2000 with the purchase of Union Pacific Resources (see NGI, April 10, 2000). After that, it upped its operating budget and acquired other key properties in Canada, including the strategic Berkley Petroleum Corp. (see NGI, April 2, 2001). However, when Anadarko began restructuring in 2004, it began to sell off some of the Canadian acreage (see NGI, Sept. 6, 2004).

Anadarko Canada currently produces 340 MMcfe/d, which is about 85% natural gas. At year-end 2005, the company was averaging 282 MMcf/d of gas (85%) and 9,000 bbl/d of oil, condensate and natural gas liquids. It has more than 3,000 producing wells (net). Last year, drilling activity included 40 exploration wells with an 85% success rate and 108 development wells with a 98% success rate. Year-end 2005 proved reserves in Canada totaled nearly 1.6 Tcfe, 85% natural gas and 76% proved developed.

“Two years ago, we demonstrated our ability to execute on a major portfolio refocusing effort, expeditiously and with higher-than-anticipated results,” Hackett said. “We intend to do so again, and therefore are not waiting for the acquisitions to close before launching the effort, since we expect to divest certain assets that are part of the current Anadarko portfolio.”

With 3.4 million net acres in land holdings, Calgary-based Anadarko Canada has about 575 employees, with area offices in Edson, Grande Prairie and Medicine Hat, AB, and Fort St. John, BC.

Anadarko Canada spokeswoman Nadine Barber said she did not know how fast the sale may occur. “It’s difficult to really determine how quickly…I think there’s going to be a lot of suitors.” She added that she hoped “the organization can go as a whole.”

Anadarko Canada’s major activities include the following:

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