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Anderson Energy, Aquest Agree to Merge

Four years after selling Anderson Exploration Ltd. to Devon Energy for $4.6 billion, legendary Canadian oilman J.C. Anderson last week launched a bid to acquire Aquest Energy Ltd. in an all-share transaction.

Aquest is a junior producer based in Calgary, which focuses on natural gas exploration in Alberta and northeastern British Columbia. It drilled about 30 wells last year, and average production in 2004 was 2,000 boe/d, with an exit rate of 2,700 boe/d. Aquest's stock market value was about C$52 million last Monday, the day before Anderson made the offer.

"The acquisition of Aquest represents an exceptional opportunity for Anderson to expand its position in the Sylvan Lake area and use Anderson's expertise to develop Aquest's assets," Anderson CEO Brian Dau said in a written statement.

Aquest, which was originally formed in 1986, focused initial oil and gas acquisition and development activity in the central corridor of Alberta, between Calgary and Edmonton. This provided year round drilling access in multi-targeted natural gas reservoirs with lower risk profiles. As a result Aquest is able to maintain high working interests and profit from operational and geological synergies.

The transaction is the largest to date for Anderson, the 74-year-old who now chairs Anderson Energy. He sold Anderson Exploration to Oklahoma City-based Devon in 2001 (see NGI, Sept. 10, 2001). Along with some former employees, Anderson started Anderson Energy as a private enterprise a few months after the Devon sale.

The combined company will have daily production of more than 3,600 boe/d, although Anderson expects the company will be able to increase production to an average of 6,000-6,400 boe/d for 2006 based on its current inventory and drilling program.

Both companies' boards of directors have already approved the deal, which will give shareholders 0.31 of a share in privately held Anderson Energy for each share of Aquest. Under the agreement, Anderson common shares will be listed on the Toronto Stock Exchange. Aquest's chairman, Glenn Hockley, will join the Anderson board after the acquisition is completed.

Anderson Energy's current portfolio is mainly natural gas assets in the regions around Sylvan Lake, Greencourt and Peace River Arch areas of Alberta and northeastern British Columbia. It is conducting a 42-well drilling program at Sylvan Lake and a three-well program in the Peace River Arch.

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