Two large Canadian energy operators, Enerplus Resources Fund and Focus Energy Trust, Monday announced a “strategic combination,” of oil, natural gas and oilsands resources.
Focus unitholders will receive 0.425 of an Enerplus trust unit, a value of $17.38, for each Focus trust unit based on the closing price of Enerplus on the Toronto Stock Exchange Nov. 30. Enerplus unitholders will own approximately 79% and Focus unitholders will own approximately 21% of the combined trust, which will retain the Enerplus name.
Gordon Kerr, Enerplus CEO, defended the combination with Focus, which is weighted toward natural gas, saying, the company “remained bullish on the longer term outlook for natural gas prices…It may appear counterintuitive to increase natural gas exposure at a time when North American natural gas prices are currently depressed. However, these assets have attractive economics at the current prices and cost structures and we see signs of potential cost savings.”
“Focus is contributing premier properties with high netbacks, low operating costs and strong capital efficiencies in resource plays which are complementary to our existing portfolio. We expect a smooth integration because of the concentrated nature of Focus’ properties, as well as the considerable property overlap and similar operating philosophies of the two organizations.”
For Focus shareholders the transaction offers “increased exposure to oil, a greater diversity of resource plays, less asset concentration risk, a larger portfolio of more diverse organic drilling opportunities, increased tax pools and oilsands exposure, in a larger well capitalized entity with significant liquidity,” said Derek Evans, Focus president.
The combined trust will have an expanded portfolio of resource play assets that offer significant low risk and repeatable development prospects, including shallow gas, crude oil waterfloods, deep tight gas, Bakken oil and oilsands, the companies said. The combined trust will be one of the only conventional oil and gas trusts with significant exposure to the oil sands with future production potential of over 60,000 bbls/d. Its combined resource production is expected to be more than 100,000 boe/d that is more than 70% operated.
The combined enterprise value of approximately $7.6 billion is expected to provide greater financial capacity to pursue additional merger and acquisition activity and large capital projects, the trusts said. Focus brings to the table its interests in the large shallow gas Shackleton field in Saskatchewan and the deep tight gas Tommy Lakes assets in northern British Columbia, as well as low operating costs.
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