Dallas-based Hunt Oil Co. snagged another gas-rich Canadian property last week by reaching an all-cash deal to acquire Edmonton-based Chieftain International Inc. With the unanimous support of both boards, Hunt will pay $29 per share, making the deal worth $600 million (C$915 million). Hunt also will assume about $15 million in debt.
Hunt has been prowling for Canadian acquisitions for more than a year now. It lost a hostile takeover battle for Berkeley Petroleum Corp. in February when the Canadian producer merged with Anadarko Petroleum Corp. (see NGI, Jan. 8; Feb. 19). However, Hunt has been more successful than not.
In February, Hunt picked up some of Canadian 88 Energy Corp.’s Alberta assets (see NGI, May 7) for $115 million (C$176 million). The acquisition included 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. And a year ago, Hunt acquired Calgary-based Newport Petroleum Corp. for C$5.50/share in cash, or about C$760 million.
Independent Chieftain, which was rumored to be up for sale in March, is active primarily in the U.S. Gulf of Mexico. It also has operations in southeast Utah and the United Kingdom sector of the North Sea, and has exploration offices in Dallas and New Orleans. Second quarter production is forecast to be about 150 MMcf/d, up 49% from its average in 2000.
“We have the highest respect for the officers and directors of Chieftain and the job they have done in terms of building their company over the years,” said Hunt CEO Ray L. Hunt. “Chieftain’s people and operations are first class in every respect.”
James B. Jennings, Hunt’s president, said Chieftain had an “outstanding inventory of exploration acreage and prospects,” which would complement Hunt’s efforts in the Gulf.
“Chieftain has historically had great success with the drill bit in one of our core areas of exploration–the Gulf of Mexico,” said Jennings. Hunt’s major operations are along the Gulf Coast, as well as in the Republic of Yemen, Western Canada and Peru. It also is a major participant in the Camisea block, which contains the largest proven reserves of gas in South America.
“This all-cash offer at a time of market uncertainty represents a transaction beneficial to the Chieftain shareholders and has been strongly endorsed by our directors,” said Chieftain CEO Stanley A. Milner. “Throughout the negotiations, the Hunt organization has recognized the value of Chieftain.”
Hunt’s financial adviser is J.P. Morgan Securities Inc., and CIBC World Markets Inc. is advising Chieftain. Under the definitive agreement, Chieftain, in certain circumstances, would pay Hunt $20 million if the deal were not completed. The offer will be mailed soon and would expire 35 days after the mailing. At least two-thirds of Chieftain’s shares must be offered for the acquisition to be completed.
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