Royal Dutch Shell Plc, the world's second-largest energy company after Exxon Mobil, has agreed to acquire Duvernay Oil Corp for C$5.9 billion ($5.87 billion) to expand natural-gas production in western Canada and double its current capacity in the continent.
Shell is offering C$83 per share ($82.59) for Alberta-based Duvernay Oil, which plans to triple its natural gas production of about 25,000 barrels of oil equivalent per day (boe/d) to about 70,000 boe/d by 2012. This offer is at a whopping 42 per cent premium over the Friday closing price of C$58.44.
Based on Duverney's 62.5 million shares outstanding, the transaction is valued at $5.16 billion. Including assumed debt, Royal Dutch Shell says the acquisition is worth C$5.9 billion ($5.87 billion). The acquisition is Shell's largest since its purchase in April 2007 of the 22 per cent stake in Shell Canada Ltd. it didn't already own.
As per calculations, Shell will be paying the equivalent of about $9.10 per thousand cubic feet of gas reserves. That's more than double the price offered last month by XTO Energy Inc. in its proposed $4.4 billion takeover of Hunt Petroleum Corp announced last month. (See: XTO Energy to buy Hunt Petroleum in $4.19 billion cash-stock deal)
Shell's offer is conditional on holder of at least 66.67 per cent of the outstanding common shares of Duvernay tendering their shares. Duvernay directors have committed to selling their own shares, representing 18.1 per cent of the company. The company has also agreed to pay a fee of $119.4 million in the event the deal doesn't go through.
Alberta-based Duvernay has concentrated its activities to northwest Alberta and northeastern British Columbia and has 1,800 square kilometres (450,000 acres) of land holdings, producing 25,000 barrels of oil equivalent (boe) a day, consisting mostly of gas, and is developing so-called tight-gas projects in rock which Shell hopes could add to its portfolio of tight gas interests of 80,000 boed in the US.
Shell expects the Duvernay acquisition to yield 70,000 boed by 2012
Tight gas is contained in difficult reservoirs and was once considered uneconomic to extract. However, high gas prices and advances in technology have led to a surge of investment in such reserves.
"Shell has a proven track record in North America tight gas activities. Duvernay could become a valuable part of the Shell portfolio," Shell's CEO Jeroen van der Veer said in a statement.
Royal Dutch Shell plc, commonly known simply as Shell, is a multinational oil company of British and Dutch origins. It is the second largest private sector energy corporation in the world, and one of the six "supermajors" (vertically integrated private sector oil exploration, natural gas, and petroleum product marketing companies). The company's headquarters are in The Hague, Netherlands, with its registered office in London, UK (Shell Centre).
The company's main business is the exploration for and the production, processing, transportation and marketing of hydrocarbons (oil and gas). Shell also has a significant petrochemicals business (Shell Chemicals), and an embryonic renewable energy sector developing wind, hydrogen and solar power opportunities. Shell is incorporated in the UK with its corporate headquarters in The Hague, its tax residence is in Netherlands, and its primary listings on the London Stock Exchange and Euronext Amsterdam.
Shell's revenues of $318.8 billion in 2006 made it the third-largest corporation in the world by revenues behind only Exxon Mobil and Wal-Mart. Its 2006 gross profits of $26 billion made it the world's second most profitable company, after Exxon Mobil and before BP.
Forbes Global 2000 in 2007 ranked Shell the eighth largest company in the world. Also in 2007, Fortune magazine ranked Shell as the third-largest corporation in the world, behind Wal-Mart and Exxon Mobil. The group had annual revenues of $355.8 billion last year.