PanCanadian, AEC to wed?
Rumour that union is in the works has grown legs
Claudia Cattaneo, Calgary Bureau Chief -- Financial Post
nationalpost.com
CALGARY - The recent, unexplained departure of David Tuer as chief executive of PanCanadian Energy Corp. is fuelling speculation that the company is working on a merger with its closest competitor, Alberta Energy Co., as a way of plugging its leadership void.
According to the speculation, Gwyn Morgan, the highly regarded chief executive of AEC, would lead the combined entity, which would become a Canadian energy powerhouse with a market capitalization of more than $20-billion. The merged company would be North America's largest natural gas producer, increasing its ability to compete with U.S. rivals that have been aggressively expanding in Canada.
Analysts said the idea, which has been making the rounds for days and has helped strengthen the stocks of both companies, has legs and is likely being pitched by investment bankers to both firms.
PanCanadian closed at $43.91 yesterday, up 56¢, while AEC closed at $62.25, down 25¢.
However, there is skepticism that a deal is imminent.
Mr. Tuer resigned abruptly Oct. 14 for "personal reasons." The company refused to provide further explanation, setting off a whirlwind of rumours about what caused his unexpected departure.
Regardless, some see the leadership void as effectively putting PanCanadian on the block by making it easier for the company to hammer out a deal without a chief executive. PanCanadian was already seen as a sitting duck for a takeover following its spin off from Canadian Pacific Ltd. last month because of its natural gas assets in Western Canada.
"[PanCanadian] is a stock that the investment bankers want to get taken over," said Wilf Gobert, head of research at Peters & Co.
It would hardly be surprising if AEC, along with other large oil and gas companies, are sizing up PanCanadian for a deal, he added.
One of the attractions of a PanCanadian/AEC combination is the complementary assets, said Martin Molyneaux, head of research at FirstEnergy Capital Corp.
Both companies grew into large, natural gas focused independents with international operations from a Western Canadian base.
PanCanadian's key assets are six and a half million acres of freehold lands in southern Alberta where it holds the mineral rights. The lands account for more than half its production and are its largest cash generator. The company has built on the assets by diversifying in the U.K. North Sea, the Gulf of Mexico, and on the East Coast offshore, where it's developing the Deep Panuke natural gas discovery. In the third quarter, PanCanadian's natural gas production averaged about 1 billion cubic feet a day.
AEC, with1.4-billion cubic feet a day of production in the third quarter, has large natural gas operations in Western Canada and wants to bulk up internationally. It already has a significant presence in Ecuador and the U.S.
"[Combined] you would have a producer that's closing in on 300,000 barrels a day [of oil], and closing in on 3 billion cubic feet of natural gas a day, which would make it easily North America's largest natural gas producer," Mr. Molyneaux said. |
