Conoco to acquire Gulf Canada
29 May 2001
The boards of directors of Conoco and Gulf Canada Resources Limited have unanimously approved an acquisition agreement under which a wholly owned Canadian subsidiary of Conoco will acquire Gulf Canada for C$12.40 (US$8.02) per ordinary share in cash, or approximately C$6.7 (US$4.3) billion in total equity.
Conoco also will assume approximately C$3.1 (US$2.0) billion of Gulf Canada's net debt, preferred stock and minority interests. The transaction price represents a premium of 35 percent over Gulf Canada's closing stock price of C$9.18 on Friday, May 25, 2001.
The acquisition will be immediately accretive to Conoco's earnings and cash flow per share, taking into account normal purchase accounting adjustments for unproved properties, goodwill and anticipated cost savings. The transaction is expected to close in the third quarter.
With the addition of Gulf Canada's proved reserves of over 1 billion barrels of oil equivalent (BOE), Conoco's total worldwide reserves (including syncrude) will increase almost 40 percent to 3.7 billion BOE. Total worldwide production will increase 32 percent to 335 million BOE in 2001.
The estimated cost per proved BOE of the transaction is US$6.21. The acquired properties offer the potential to add 1.2 billion BOEs from probable reserves already identified. The combination will increase Conoco's North American natural gas production and proved reserves by 50 percent to 1.4 billion cubic feet per day (BCFD), and 4.1 trillion cubic feet (TCF) net, respectively.
Conoco's proforma North American liquids production (crude oil, syncrude and NGLs) will more than double and its proved North American liquids reserves will more than triple as a result of this transaction.
The acquisition is subject to United States and Canadian regulatory approvals. Conoco expects to mail definitive tender offer materials to Gulf Canada shareholders and make all necessary regulatory filings shortly. Under certain circumstances, Gulf Canada has agreed to pay Conoco a breakup fee of C$220 million.
