PanCanadian Petroleum Ltd. will spin off from Canadian Pacific Ltd. (CP) by Oct. 1, leaving PanCanadian with a market value of C$11.7 billion and a place on the top five list of North American exploration and production companies, CFO Wesley Twiss said last week. With the breakup, PanCanadian will have a new name — PanCanadian Energy — and seats on the Toronto and New York Stock Exchanges. In return, CP will distribute its 85% interest to shareholders at a ratio of 0.684 per share for each CP share.
As important, PanCanadian will “likely” consider major acquisitions, something that was difficult to do with other CP divisions competing, said Twiss, who spoke at the Canadian Oil and Gas Conference hosted by Peters & Co. Ltd. He added, however, that he does not see any company on the horizon with plans to acquire PanCanadian.
Calling it “pure speculation,” Twiss said that despite the plethora of Canadian takeovers in recent months, including Tuesday’s announcement of Devon Energy Corp. acquiring Calgary’s Anderson Exploration Ltd., there has been no excessive trading since the CP announcement to suggest anyone was “accumulating a position.” Having said that, he said, “we’re obviously attractive and we won’t have any major or controlling shareholders after Oct. 1, so like almost every other company…we’re always subject to the possibility” of a takeover.
PanCanadian has “more growth opportunities than it has ever had before,” said Twiss. “We have a very successful business model and are very confident that it will allow us to continue to grow.” He said the spinoff will give PanCanadian the distinction of being Canada’s largest market cap energy company, with a “real opportunity for energy investors to establish a foothold in our company at relatively low commodity prices.”
Natural gas will continue to be the company’s focus, as Twiss pointed out it has a large proven reserve base of 1,043 MMboe — 59% in gas, an “unparalleled land base in the Western (Canadian Sedimentary) Basin…and a disciplined approach to capital allocation and cost management.”
In the “foreseeable” future, PanCanadian will “continue to expand its natural gas production from the Western Basin,” he said, adding that it had a “large inventory of opportunities to fuel production growth” there. Beyond that, PanCanadian also sees “growth through the drill bit along the East Coast” of Canada in the Sable Island region, as well as the Gulf of Mexico and the North Sea.
Other new opportunities that PanCanadian expects to grow the company’s value include power generation, coalbed methane projects and “value-adding acquisitions.” Twiss said the company would “relentlessly expand the value chain…we won’t let go of the molecules until we’ve extracted the value or the market” for them.
Once PanCanadian spins off, it will be traded as “PCE” on the Toronto Stock Exchange and as “PCXWI” on the New York Stock Exchange.
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