Calgary-headquartered Petrobank Energy and Resources Ltd. and Ventus Energy Ltd. announced Wednesday they will merge into a new company that will have three focused core areas in Western Canada, including northwest Alberta, central Alberta and southeast Saskatchewan. The arrangement gives Ventus shareholders the option of receiving C$9.75 cash or one common share of the new company for each share they hold, while Petrobank shareholders would receive one new share for each 4.25 Petrobank shares held.

The new company would “provide the financial and technical platform from which domestic and high impact international projects will be pursued,” according to a statement. In Western Canada, the new company will have 1.1 million net acres of undeveloped land with a large inventory of drilling locations that will allow it to operate a year-round development and exploration program. After both Petrobank and Ventus dispose of certain properties, the combined company will produce approximately 35 MMcf/d with liquids production of 10,000 bbl/d.

Included among the assets is an agreement with the Gift Lake Metis Settlement, which will allow the new company access to more than 180,000 acres of land. Ventus has drilled four exploration wells at Gift resulting in two gas discoveries. Also, the new company will continue to focus on aboriginal partnerships covering northern core area land blocks.

“The new company’s high quality Western Canadian asset base provides a strong operating and financial platform, which will allow us to reduce our cost of capital and achieve potential tax efficiencies with international development projects,” said Petrobank CEO John D. Wright. Wright will assume the CEO and president position of the new company as well.

Pro forma net debt after completing the transaction will be approximately C$140 million, including C$47.5 million of subordinated notes. The new company also would have 31.7 million common shares outstanding along with 2 million voting preferred shares. The agreement includes a break fee equal to 3.5% of the equity value in certain circumstances. So far, Ventus directors and officers holding approximately 12% of the common stock of Ventus and Petrobank directors and officers holding 35% of the voting shares of Petrobank have agreed in favor of the arrangement.

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