Acquisition

Calgary-based unconventional gas player Mahalo Energy Ltd. says its pending acquisition of Peregrine Energy Ltd., also of Calgary, will complement its existing low-risk U.S. and Canadian coalbed methane and shale portfolio with high-risk, high-reward prospects in Northeast British Columbia and west-central Alberta.

Upstream merger and acquisition activity is booming, with 2005 spending on corporate acquisitions more than tripling to $120 billion as the corporate deal count rose 40% year-over-year, according to John S. Herold and Harrison Lovegrove & Co. Ltd.

Encore Acquisition Co. said Tuesday it entered into a joint development agreement with ExxonMobil to further develop seven natural gas fields in West Texas. Encore will have the opportunity to earn 30% of ExxonMobil’s working interest in each well drilled. It will operate each well during the drilling and completion phase, after which ExxonMobil will assume operational control of the well.

Speculation grew this week in Montana regarding potential merger/acquisition partners for the state’s largest utility owner, South Dakota-based NorthWestern Energy Corp. But a NorthWestern spokesperson Wednesday said its board has not set any timetable for deciding on competing offers, and would not speculate on new entrants in addition to the previously announced interest by Black Hills Corp. and a public sector coalition of Montana cities named Montana Public Power.

After a lull following the post-Enron credit crisis, corporate merger and acquisition (M&A) activity once again is on the rise, driven by interest in regional market scale and rising cost pressures among several other factors, according to a new report by Merrill Lynch analysts Steve Fleishman, Jonathan Arnold and Elizabeth Parrella.

KeySpan Corp. confirmed Friday it is in talks with various parties that could lead to its acquisition, but said it would likely stay mum on any developments until its board either approves a deal or terminates discussions.

Petrohawk Energy Corp. closed its previously announced North Louisiana gas properties acquisition and entered into a separate transaction to unload its Gulf of Mexico properties. First announced in December (see Daily GPI, Dec. 15, 2005), the Houston-based junior independent purchased two packages of natural gas reserves in the Elm Grove and Caspiana fields of northern Louisiana in private transactions for $262 million, before working capital and other closing adjustments. As of Dec. 31, 2005, Petrohawk owned 551 Bcfe in proved reserves, of which 76% were natural gas. With the added production from this transaction, Petrohawk’s current estimated production rate is 146 MMcfe/d. The acquired reserves are 98% natural gas and include an estimated 106 Bcfe of proved reserves and 100 Bcfe of probable and possible reserves. The assets include about 27,400 gross acres, with 80% of them operated. They include 11 producing wells and 185 identified drilling locations. Average 2006 projected output is expected to be 20 MMcfe/d; current production is 16 MMcfe/d. Lease operating expenses for 2006 are estimated to be $0.55/MMcfe. Petrohawk also announced Monday it is has entered into a definitive agreement with a private company to sell substantially all of its Gulf of Mexico properties for $52.5 million in cash. Petrohawk said these properties have internally estimated proved reserves of 26 Bcfe, are 70% gas, and are 59% proved developed and 27% operated, with lease operating expenses of $2.35 per Mcfe. Petrohawk estimates current production at 10 MMcfe/d. The transaction is expected to close in March 2006.

Dallas-based Apollo Resources International Inc. and its wholly owned subsidiary Apollo LNG said Thursday that they have completed their acquisition of Applied LNG Technologies USA LLC (ALT), a provider of liquefied natural gas (LNG) made locally to transportation, industrial and municipal markets in the western United States and portions of Mexico.

About 96% of Terasen Inc. shareholders voted to approve Kinder Morgan Inc.’s proposed acquisition of all outstanding Terasen shares for about C$35.91/share ($3.1 billion in cash). Kinder Morgan also will assume $2.5 billion in Terasen debt.