Enerplus makes big foray into U.S. as it buys Lyco Energy
Energy trust to pay $509.4-million as sector looks south in order to grow
RICHARD BLOOM With files from Canadian Press Tuesday, July 19, 2005 Printer Friendly version
Enerplus Resources Fund has made the largest takeover deal so far by a Canadian energy trust in the United States, snapping up a private oil and gas company with operations in Montana and North Dakota for more than half a billion dollars -- one of two major deals out of the oil patch yesterday.
Calgary's Enerplus said it will pay $509.4-million for privately held Lyco Energy Corp., which produces about 7,000 barrels of oil equivalent (BOEs) a day (92 per cent light oil and the rest natural gas).
"Most people figured it was just a matter of time, but here we go," said Leslie Lundquist, manager of the $925-million Bissett Income Fund in Calgary, referring to a large-scale trust purchase of U.S. assets.
The Enerplus deal eclipses last year's purchase by Provident Energy Trust of BreitBurn Energy LLC for $155-million, which Provident said was the first foray south of the border by a Canadian trust.
Ms. Lundquist, meanwhile, said some industry experts feel that Canadian oil trusts have already got the bulk of the attractive assets in this country and need to look elsewhere if they want to grow.
"So where do you go next? When you look at the Vermilion example, they have already started making acquisitions overseas, so in a sense, Vermilion is the trailblazer," she added, referring to Vermilion Energy Trust's purchase of a major stake in an Australian offshore oil field.
In a statement, Enerplus said the deal "represents a strategic move into the United States and establishes a new core resource area with significant development potential."
The purchase includes approximately 120,000 acres within the Williston Basin in Montana and North Dakota "that may provide sizable light oil drilling potential in the Bakken, Red River and Mississippian formations," it added.
The deal will close Aug. 30, assuming it receives shareholder and regulatory approvals, Enerplus said. It said it will fund the acquisition with a bought-deal issue of new units worth $351-million, and from existing credit facilities.
In addition to the purchase, Enerplus aid it is increasing its monthly distribution to 37 cents a unit from 35 cents.
Units of Enerplus lost 34 cents to $47.67 yesterday on the Toronto Stock Exchange.
Separately yesterday, Calgary-based StarPoint Energy Trust said it will buy some light oil properties in southeastern Saskatchewan for $318-million from an unidentified senior Canadian oil and gas company.
The properties have production of 6,100 BOEs a day, with 16.6 million BOE of proven and probable reserves. The deal is scheduled to close on Aug. 9.
The purchase will be StarPoint's third such deal in recent months, a string of acquisitions that Ms. Lundquist noted has garnered mixed reactions.
"It is certainly on an aggressive expansion program . . . I think there's a lot of excitement around it, but at the same time that's a lot of integration of four separate companies," she said.
"So I think there's a little bit of nervousness about that."
StarPoint units dipped 3 cents to $19.20 on the TSX.
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