Dana Petroleum said yesterday it had agreed to buy UK North Sea-focused Canadian company Bow Valley Energy for about £125million.
The Aberdeen-based oil and gas operator said the deal, approved unanimously by the directors of both companies, included the assumption of an estimated £100million of net debt.
Dana chief executive Tom Cross said: “Dana already has a working knowledge of the North Sea assets of Bow Valley. For example, both companies hold interests in the Enoch oil field and Bow Valley’s Kyle oil field is tied back to Dana’s Banff oil field.”
Mr Cross said the deal would also give Dana £154million of tax losses built up by Bow Valley, of significant tax benefit to a company like Dana, which was highly profitable and achieving record production.
He said the acquisition would add about 7,800 barrels of oil equivalent (boe) per day (boepd) of production to the Dana portfolio, representing a 20% increase over its average production last year of 39,400boepd.
He said that based on estimates of the anticipated benefits of the tax losses to Dana, the net acquisition cost to Dana was about $9.47 a barrel. Mr Cross added: “Bow Valley, which has 98% of its value in the North Sea, is a very good fit for Dana.
“It also has exploration interests in Alaska, which we’ll have a look at before deciding what to do. We’ve already had calls asking if we want to sell the Alaska interests.”
Bow Valley has stakes in four producing oil fields in the UK – Blane, Chestnut, Enoch and Kyle – with a fifth, Ettrick, due to come on stream within three months.
After completion of the transaction in April, Dana’s number of producing fields will rise to 35.
Bow Valley’s production is predominantly oil, with more than 80% liquids and less than 20% gas. This is similar in balance to Dana’s production which in 2008 was 74% liquids and 26% gas.
Dana estimates the transaction will increase its proven and probable reserves by about 11.3million boe.
Bow Valley’s portfolio includes some exploration and appraisal opportunities. These will be further analysed by Dana and could lead to additional prospects.
Dana is drilling eight exploration wells across the North Sea and north Africa, with 17 wells scheduled for this year, more than at any time in its history.
In connection with the transaction, and as a broader corporate refinancing initiative, Bank of Scotland is extending to Dana a new three-year £280million credit facility, which Mr Cross said gave Dana the funding to pay for Bow Valley shares, repay all Bow Valley’s debt and make other acquisitions.
Broker Evolution Securities said yesterday that Bow Valley shares had lost 95% of their value in 12 months, so it was not surprising a deal had been struck to take it over.
It added that it was logical in the current environment for strong exploration and production firms to swallow up the weak, and Dana was making a sensible acquisition at a reasonable price.
Bow Valley, which employs 12 staff in Canada plus eight in the UK, said in November it was considering all options for its future, including a sale of the business.