Calgary-based PanCanadian Petroleum Ltd. agreed Friday to acquire cross-town independent Causeway Energy Corp. for C$65 million ($43 million), a deal that includes all of Causeway’s U.S. assets in Montana and Canadian assets in Southern Saskatchewan and Alberta. In the first quarter, Causeway reported an average production of 9,366 Mcf/d, with 99% in natural gas — an increase of 50% over the first quarter of 2000.

PanCanadian’s agreement also includes assumption of Causeway’s C$4 million in debt, bringing the total value of the acquisition to C$69 million. PanCanadian picks up 210,000 acres of undeveloped land, and 100% interest in the cross-border Chinook Pipeline.

In a statement, PanCanadian, Canada’s leading oil and gas exploration and production company, said the acquisition would add daily production of 8.5 MMcf/d of natural gas and reserves of 80 Bcf on a proven and one-half probable basis. Causeway reported that its revenue jumped 220% in the first quarter, to C$7.25 million from $2.26 million in 2000, even though it sold its oil production assets in Turin, AB at the beginning of the fourth quarter 2000.

Earnings also skyrocketed in the first quarter for Causeway, growing to C$2.95 million ($0.126/share), up from C$1.3 million in the first quarter of 2000 (C$0.061/share).

“With this acquisition, we are building another stepping stone into Montana with under-exploited and highly prospective lands,” said Terry Schmidtke, general manager of PanCanadian’s Great Plains business unit. “These new long-life, low-risk assets clearly fit our existing assets and allow us to deploy our industry-leading technologies and exploration strategies to regions in Montana and Saskatchewan.”

Causeway’s Canadian assets, which include its newest discovery at Medicine Lodge, AB, would be transferred to Bushmills Energy Corp., a Causeway subsidiary, under a separate agreement. In that agreement, PanCanadian said the C$13.5 million deal would include the assumption of C$6 million of debt.

Bushmills would be recapitalized with C$5.1 million of new private placement equity, giving it enough capital to continue its Canadian E&P program, PanCanadian said. Bushmills owns about 26,000 net acres of undeveloped land, 2,560 acres near the Medicine Lodge discovery. When the acquisition is completed, Bushmills plans to drill one exploration well in the Medicine Lodge area by the end of this year, PanCanadian said.

Under the merger agreement, Causeway shareholders would receive C$2.58 in cash for each share and one-fifth of a common share of Bushmills. Causeway’s officers, directors and other shareholders hold 44% of the outstanding shares of stock on a fully diluted basis, and they have voted in favor of the deal, said PanCanadian.

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