Royal Dutch Shell Group .com Rotating Header Image

National Post (Canada): Swift action cut costs in giant

oilpatch deal

SCOTIAWATEROUS CNQ paid US$4B for Anadarko’s Canadian assets
BY SCOTT DEVEAU Financial Post [email protected]

The brevity of a deal is sometimes as important as the price, and that certainly was the case with the largest oil and gas acquisition in Canada last year.

The breakneck pace in which Canadian NaturalResources Inc.’s “swat team” of evaluators put together its US$4-billion offer for Anadarko Petroleum Corp.’s Canadian assets last year wound up undercutting the advertised price by about US$1-billion, according to Adam Waterous, president and head of ScotiaWaterous, which acted as financial adviser for Canadian Naturalon the deal.

In a mere three weeks from when Anadarko’s data room was first opened to Canadian Natural, details of the purchase were made public.

The deal, which ended up being the largest in the Canadian oil and gas sector last year, would normally have taken six to eight weeks to complete, but was expedited by Canadian Natural’s evaluators, who routinely and rapidly crunch the merits and upward potentialof possible purchases.

Canadian NaturalResources Inc. is a bit of a juggernaut in Canadian oiland gas acquisitions. The company has built its US$30-billion enterprise from the ground up in just 18 years, primarily through strategic acquisitions. It has built a tight team of evaluators that feeds its growth.

Scotia Waterous, the oiland gas mergers and acquisitions arm of the Bank of Nova Scotia, has also established itself as the largest player in Canadian oil and gas acquisitions market.

Since 2003, Scotia Waterous has increased its dollar value of announced transactions ninefold to US$20.2-billion in 2006. It’s set to outdo itself again this year by advising RoyalDutch Shell PLC in its minority buyout of Shell Canada Ltd. The estimated $8.7-billion deal, if it goes through, would be the second largest in Canadian history.

With Scotia Waterous’s backing, Canadian Natural  proved a powerfulforce in the swift acquisition of Anadarko’s Canadian naturalgas assets.

The U.S.-based

Anadarko needed some quick cash to cover its debt from purchasing KerrMcGee Corp. and Western Gas Resources Inc. in June for roughly US$21-billion.

Anadarko said publicly it wanted maximize returns on its Canadian assets by fragmenting the sale, but it approached a small group companies about selling the properties in a lump sum. What Anadarko needed was a quick sale for a fair price with dealcer tainty.

“It’s always good to have a seller where not the only criteria is value, but speed is also of importance,” he said.

EnCana Corp., Talisman Energy Inc. and Devon Energy Corp. also showed interest in the property, but were turned off by the prospective price.

Anadarko’s assets were a good fit for Canadian Natural, who was looking to increase its naturalgas business andhad a lot of operations in the surrounding area that would lend synergies to extract further value than Anadarko could on its own.

Anadarko had acquired the properties as part of the influx of U.S. firms into Canada around 2000 looking to bolster their naturalgas reserves.

Mr. Waterous credits the dogged persistence of Canadian Natural’s Murray Edwards for the deal. Mr. Edwards refused to be buffaloed into a higher advertised price, he said.

The assets were producing 358 million cubic feet per day of natural gas and 9,300 barrels a day of crude oiland natural gas liquids. They also included 1.5 million acres of underdeveloped land in B.C. and Alberta.

In the end, with a little “elbow grease,” Canadian Natural closed the deal in November for $4.075billion, or the equivalent of $2.47 per thousand cubic feet of gas. The stake is estimated to increase Canadian Natural’s cash flow per share to $9.50 for 2007 and $10 for 2008.

“From Anadarko’s side it was a case of a bird in the hand is worth two in the bush,” Mr. Waterous said. “Speed allowed [Canadian Natural] to acquire the assets at a much more attractive value.”

Mr. Waterous said there was added bonus for Scotia Waterous too. “Sometimes the best sign that you’re doing a good job for you client is when you get hired by the seller to do their next sale. That’s what happened in our case. Anadarko has retained our services to sell of some additional assets in the U.S. in the billion dollar range.”

This website and sisters royaldutchshellplc.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.

Comments are closed.