An El Paso Corp. subsidiary, El Paso Oil & Gas Canada Acquisition Inc., has completed the acquisition of Canadian independent Velvet Exploration Ltd., picking up approximately 41.9 million common shares, which equates to 96.7% of Velvet shares outstanding, with its offer of C$8.15 per share. The offer closed at the end of July. Cost of the acquisition, including US$52 million in debt, is estimated at about US$280 million.

El Paso is immediately acquiring the remaining shares of Velvet pursuant to the compulsory acquisition provisions of the Alberta Business Corporations Act.

The majority of Velvet’s properties are located in the highly prospective Foothills and Deep Basin areas of western Alberta, an area which El Paso is already actively exploring. Velvet holds about 172 Bcf of net proved reserves (59% gas) in the Western Canadian Sedimentary Basin and 403,000 acres of undeveloped land. El Paso said the total acquisition cost is US$1.16/Mcfe of proved reserves, after allocating value to Velvet’s land, seismic position and tax pools. The acquisition was announced in June (see Daily GPI, June 15).

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