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Direct Energy to Pay C$56.7M for TransGlobe's Canadian Assets

April 21, 2008
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Hot on the acquisition trail, Direct Energy, a subsidiary of Centrica plc, has agreed to acquire all of the Canadian gas and oil assets of Calgary-based TransGlobe Energy Corp. for C$56.7 million, the company said. The transaction is expected to close by the beginning of May with an effective date of Jan. 1, 2008.

In addition to a production base of 8.7 MMcfe/d, weighted 75% natural gas and 25% oil, the acquisition includes 50,000 acres of land with development potential located next to Direct Energy's current gas portfolio in Alberta. The acquisition will increase Direct Energy's reserves by at least 15 Bcfe, the company said.

TransGlobe said it will use the proceeds from the sale to reduce debt it incurred over the past few months acquiring producing assets in Egypt.

"Our strategic decision to divest of our Canadian assets in order to focus entirely on our Middle East/North Africa properties has already been validated," said TransGlobe CEO Ross Clarkson. "While we are selling approximately 1,450 b/d of Canadian production, we have increased the output of our recently acquired Egyptian assets from the total 2,500 b/d we purchased to approximately 3,300 b/d at this time."

The announcement came two weeks after Direct Energy said it had signed an agreement to acquire Pittsburgh-based Strategic Energy LLC, a subsidiary of Great Plains Energy Inc., for a total cash consideration of $300 million (see NGI, April 7). The merger of Strategic Energy with Direct Energy's existing commercial and industrial business unit, Direct Energy Business, will create a business supplying almost 55 terawatt hours of electricity and gas to customers annually, Direct Energy said.

Earlier this year Direct Energy acquired Alberta producer Rockyview Energy Inc. (see NGI, Feb. 4). In that deal Direct Energy paid C$3.16/share -- a 29% premium over the 20-day weighted average closing price -- for what amounted to a C$113.3 million transaction. Rockyview Energy has conventional oil and gas and coalbed methane operations in central and western Alberta and the Peace River Arch in northwestern Alberta. In addition to a production base of 2,700 boe/d -- 97% of it natural gas -- Rockyview has a 100,000-acre undeveloped land portfolio with numerous identified drilling locations.

Direct Energy owns and operates approximately 3,000 natural gas wells in Alberta and three gas-fired power plants in Texas, and has renewable power purchase agreements totaling 813 MW in Texas. Strategic Energy is licensed to supply retail electricity to customers in deregulated energy markets in California, Connecticut, Delaware, Illinois, Maryland, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania, Texas and Washington, DC.

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