State controlled Norwegian oil firm Statoil has disclosed that it has agreed to make an all-cash offer to acquire Calgary-based North American Oil Sands Corporation, or NAOSC, for around 2.2 billion Canadian dollars or $1.96 billion, representing C$20 per share. NAOSC operates an area of 1,110 square kilometers of oil sands leases in the Athabasca region of Alberta, Canada. NAOSC’s leases contain an expected 2.2 billion barrels in recoverable oil reserves. The transaction has marked the on going trend of global expansion into the oil sands region, which contains huge new sources of oil but can be extracted at higher costs than conventional production. The deal however is subject to regulatory approval.
Speaking on the prospective acquisition, NOAOS’s board of directors said that it has unanimously approved the offer, which is expected to close in June. The company’s major shareholders, directors and officers, have agreed to offer their shares. On the other hand, Helge Lund, chief executive of Statoil, said in a release, ‘Today’s acquisition is an important strategic move which supports our global growth ambition and increases our reserve bookings in the long term’.
The deal was struck even amid domestic concerns that proposed emissions reduction standards and possible royalty structure changes are making the region less competitive. While, the head of Statoil’s Canadian acquisition team said that Alberta’s rare combination of long-life reserves and relatively stable regulatory regime make it ‘natural’ for the firm, one of the world’s top 10 publicly traded oil producers, given its wish to increase its non-Norwegian output and heavy oil production.
The offer by Statoil, valued at $20 per share, has already been accepted by North American’s three principal shareholders, Paramount Resources Ltd., ARC Financial Corp., and the Ontario Teachers Pension Plan, which together possess about 69 per cent of the company, effectively making the acquisition. The deal is expected to be completed by the end of the second quarter. However, the remarkably towering capital costs associated with oil sands development had guided major shareholder Paramount to look for a takeover for North American, with Statoil seeming a logical buyer for the firm, making the eventual deal little surprise.
The acquisition is a clear indication that it’s becoming increasingly more difficult to get conventional oil resources. Statoil has exhausted close to $3.6 billion in the past two years purchasing assets in the Gulf of Mexico to make up for lower output from aging North Sea fields. Earlier this week, Statoil, Chevron Corp. and other producers have inked an accord allowing Venezuela to take over operations in heavy-oil joint ventures in the country. The proposed deal also comes as the company has been forced out of the heavy oil joint ventures it operates in Venezuela by the Venezuelan government.
