Two of Canada's largest energy trusts, Calgary-based PrimeWest Energy Trust and Shiningbank Energy Income Fund, agreed to merge in an all-stock deal valued at C$1.25 billion that will create a natural gas-heavy producer with an undeveloped land base of more than 1.1 million net acres primarily focused in west central Alberta, northeastern British Columbia and the Williston Basin in the United States.
The trust, to be called New PrimeWest, will have estimated proved plus probable reserves of 280 MMboe. Based on the combined 1Q2007 results, New PrimeWest would have had production of 66,000 boe/d, allocated 70% to gas and 30% to crude oil and natural gas liquids.
New PrimeWest is expected to have a multi-year suite of development opportunities now in excess of C$1.4 billion, reflecting the potential in the combined asset bases. Its reserve life index will be about 11.5 years.
About 4,000 boe/d of noncore assets are expected to be sold as part of the merger. Currently, PrimeWest and Shiningbank each market 1,000 boe/d of noncore production. Once the merger is completed, 2,000 boe/d of additional production is planned for disposition, with the proceeds used to reduce debt and fund ongoing development activities.
Under the terms of the merger, each Shiningbank trust unit will be exchanged for 0.62 of a PrimeWest trust unit. Based on the May 9 closing price on the Toronto Stock Exchange of PrimeWest trust units, the exchange ratio reflects a value of C$14.60 for each Shiningbank trust unit, or a 4.2% premium. The transaction, which is expected to be completed by July 11, is subject to two-thirds approval by unitholders of each company.
Donald A. Garner, the current president and CEO of PrimeWest Energy Trust, will lead New PrimeWest. More appointments are expected to be announced prior to the closing. The board of directors of New PrimeWest will include PrimeWest Energy Trust's Chairman Harold P. Milavsky, Barry E. Emes, Harold N. Kvisle, Kent J. MacIntyre, W. Glen Russell and Peter Valentine; and David M. Fitzpatrick (current president and CEO of Shiningbank), and Robert B. Hodgins and Warren D. Steckley of Shiningbank.
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