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THE NEW YORK TIMES: Shell Canada to Offer C$2.4 Bln for BlackRock

Shell Canada to Offer C$2.4 Bln for BlackRock

Published: May 8, 2006

Filed at 10:01 a.m. ET

TORONTO (Reuters) – Shell Canada Ltd. (SHC.TO) said on Monday it will offer C$2.4 billion ($2.2 billion) in cash for BlackRock Ventures Inc. (BVI.TO) as the country's No. 3 producer and refiner intensifies its focus on heavy oil projects.

Shell Canada, 78-percent owned by Royal Dutch Shell (RDSa.L), said in a statement it is offering BlackRock C$24 a share, which represents a 27-percent premium to BlackRock's closing price on Friday on the Toronto Stock Exchange.

The board of BlackRock, an oil sands producer with all its operations in Canada, has unanimously approved the deal, the statement said.

Shares of BlackRock soared more than 26 percent to C$23.85, a touch below the offer price, early on Monday. Shell Canada's stock dipped 25 Canadian cents to C$40.75.

Shell Canada said the acquisition would add 12,000 to 14,000 barrels per day of heavy oil production and would give it access to significant additional resources.

“This acquisition is consistent with our growth plan, and BlackRock's assets are an excellent fit with our Peace River in situ assets,'' said Clive Mather, Shell Canada's president and chief executive.

Shell Canada has oil sands operations in Peace River and in the Athabasca area in Alberta, which are big targets for development. The company has said it is putting together plans to spend C$17 billion over the next five years to boost overall oil and gas production by 50 percent.

Canada's resources of tar-like bitumen in the oil sands rival Saudi Arabia's conventional reserves in size, but are far more costly to develop. The two are already among the top suppliers to the United States.

Shell Canada's parent, the third-largest western oil company by market capitalization, has been increasing its focus on heavy oil projects in the past year due to the increasing difficulty in finding big new fields and as the cost of accessing prospective exploitation acreage rockets.

Despite the higher costs of converting heavy oil and oil sands into usable products, Shell argues that such projects will offer good returns, even if oil prices fall.

Shell Canada, the country's third-largest petroleum exploration and refining company by market value, said it would fund the takeover with cash and short-term debt.

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