Canadian Superior Makes Unsolicited Offer for Canadian 88
Small producer Canadian Superior Energy launched a takeover bid for Canadian 88 Energy Corp. last week. The stock swap deal would put Canadian 88's maverick former CEO Greg Noval back in control of the firm. Noval is offering 2.75 Canadian Superior shares for each share of Canadian 88, which he left last year after a change of control. The deal is worth about C$4.95 a share, or C$700 million (US$451 million).
Although the offer was unsolicited, Canadian 88 has been searching for a buyer for months and in February received an C$176 million offer from Hunt Oil Co. for its gas properties in Alberta. Hunt bought all of Canadian 88's interests in the Caroline "B" pool natural gas project in west central Alberta and the Waterton gas property in southwestern Alberta. Along with reserves and production, the acquisition included 66,000 net acres of undeveloped land and a 3D seismic database, which will be used to develop new exploration opportunities.
Meanwhile, Canadian Superior has been aggressively building a presence offshore Nova Scotia. Driven by a vision of Nova Scotian production more doubling within four years, the ambitious junior Canadian natural-gas hunter, earlier this year set out to prove that offshore targets are no longer just the playground of the industry majors. Canadian Superior vowed to drill a C$24-million (US$16-million) Sable-area well this year. President Greg Noval said the target is the same geological formation, known as the Abenaki Reef, where PanCanadian Petroleum Ltd. scored its stellar Deep Panuke discovery and recently launched a C$1-billion (US$665-million) project to produce 400 MMcf/d. Noval is a veteran geologist who established Mobil Canada as the dominant industry participant offshore of Canada's East Coast 30 years ago.
Superior recently achieved a rare feat among Canadian juniors on frosty stock exchanges by raising C$14.5 million (US$9.7 million) with a share sale. Superior also scooped up 448 square kilometers (173 square miles) of Sable-area drilling prospects at a Nova Scotia auction last fall. Noval said his firm has received numerous overtures for "farm-in" drilling partnerships by senior companies.
The Canadian 88 addition would create a larger gas-oriented company, operating primarily in the Alberta Foothills of Western Canada and the Nova Scotia offshore area. Its assets would include 2.4 million gross acres in Western Canada and offshore Nova Scotia, as well as properties currently producing about 85 MMcf/d, a large inventory of high-impact exploration plays covering 750,000 gross (500,000 net) undeveloped acres, an inventory of 200 defined exploitation and development drilling locations and significant midstream assets with an estimated replacement cost of more than C$100 million.
"The merged companies will have one of the best and most exciting inventories of world-class exploration prospects in the Canadian Atlantic and significant Western Canadian exposure," said Canadian Superior Chairman Don Axford. "Upon completion of the merger, the company will be positioned to capitalize on the enviable situation of being one of Bay Street's and Wall Street's best Canadian natural gas energy plays."
Under the proposed plan, a new board of directors would be formed, including two directors from Canadian Superior, two from Canadian 88, two directors representing major institutional shareholders and two independent directors.
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