The depressed crude oil market continued to fuel an acquisitionfrenzy north of the border yesterday with Canadian producerRenaissance Energy mounting a friendly takeover of fellow CanadianPinnacle Resources Ltd. Renaissance CEO Clayton Woitas said theC$1.06 billion deal is designed to improve “operatingefficiencies,” build a stronger presence at a “fair price andcreate “long-term value” for shareholders.

Combined first quarter production of the companies was 115,000b/d of oil and 570 MMcf/d of gas, a 42% increase in Renaissance’soil output and 29% jump in its gas production.

“We see tremendous upside in three key areas of Pinnacle’s assetbase,” Woitas said. “First, Pinnacle’s properties in southwestSaskatchewan directly overlap our own assets in this region. Webelieve there is substantial upside for our shareholders throughthe continued development and exploitation of existing oil pools.In addition, we believe there are meaningful opportunities to findadditional pools through exploration. Further, we see unrecognizednatural gas potential in this region. Second, we see greatopportunities in Pinnacle’s Ansell and McLeod areas, which havebeen the focus of Pinnacle’s future natural gas growth. We sharePinnacle’s optimism regarding the potential of these assets, andthat they provide a platform for growth in a new producing regionfor Renaissance. Third, both companies have adjacent operations inthe Athabasca North region where continued growth in natural gasreserves and production will be pursued and additional operatingefficiencies are expected. Finally, virtually all of Pinnacle’sadditional properties fit very well into our existing assetportfolio.”

Pinnacle shareholders will receive 0.66 of a Renaissance sharefor each Pinnacle share. The exchange ratio represents an offerprice of $16.76 per Pinnacle share, which is a 28% premium basedupon the closing prices of the companies’ shares on the TorontoStock Exchange June 5. It also represents a 36% premium to thePinnacle 20-day weighted average trading price. Renaissance willassume Pinnacle’s outstanding debt of about $380 million resultingin a total transaction value of $1.06 billion if all Pinnacle’sshares are tendered. The offer for all common shares has theapproval of the boards of both companies. The deal’s valuationworks out to about $6.79 per barrel of oil equivalent (Boe) ofproven reserves as of Dec. 31. It is said to be accretive to 1998and 1999 anticipated cash flow.

The stock market apparently thought the deal was less favorablefor Renaissance shareholders, however. Renaissance share pricesfell 7%, or $1.80, yesterday to $23.60. Pinnacle stock prices,however, rose nearly 18% to $15.40.

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