El Paso Corp. officially launched its friendly C$347 million ($228 million) bid for Calgary’s Velvet Exploration Ltd. on Thursday, which, when completed, would give the Houston-based producer about 172 Bcfe more in net reserves, 59% natural gas, in the highly sought after Western Canadian Sedimentary Basin. The acquisition was announced earlier this month (see Daily GPI, June 15).

Under terms of the offer, Velvet shareholders tendering their shares would receive C$8.15 in cash for each common share, with the offer open until July 31. The offer is an 11% premium over Velvet’s closing price in Toronto before trading was halted on Thursday. El Paso also will assume C$79 million in Velvet’s debt, making the deal worth about C$426 million total.

“The acquisition of Velvet provides El Paso with a strong platform to build a significant production business in western Canada,” said Rod Erskine, president of El Paso Production Co. “Velvet has a large acreage position, which can be effectively developed using our proven technical skills.”

In the first quarter of 2001, Velvet produced nearly 31 MMcf/d and 4,053 bbl/d. It is known for making exploration and production deals with native aboriginal groups in central and southern Alberta.

©Copyright 2001 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.