Houston Community News >> Anadarko Leaving Canada

6/29/2006 CALGARY -- Anadarko Petroleum Corp. is selling its Canadian operations in an auction that will likely generate a frenzy in the oil patch and probably fetch more than $4-billion, the biggest deal in the energy business in several years.

"That's a big piece of business. Holy smokes," said analyst Chris Theal, co-director of research at Tristone Capital Inc. in Calgary.

Bidders could include Talisman Energy Inc., Mr. Theal said, along with large energy trusts.

Houston-based Anadarko is taking advantage of the booming prices for energy holdings in Canada to raise money for two multibillion-dollar acquisitions it is making in the United States. The company said it "already has received unsolicited expressions of interest from multiple parties" for the assets, and added that "the divestiture is expected to proceed quickly."

Anadarko made the announcement yesterday after markets closed. It follows a major deal announced on Friday to buy two smaller rivals in the United States for more than $21-billion (U.S.). The company said it is selling the Canadian assets to pay down debt, which it is loading up on to purchase Kerr-McGee Corp. and Western Gas Resources Inc.

Investors and analyst have been critical of Anadarko's debt picture.

Bidding for Anadarko's properties will be fierce, analysts said. The price of assets in Canada has risen by almost two-thirds in the past two years as the availability of properties has dwindled, said Brent Heinz, vice-president of Sayer Energy Advisors, a Calgary consultancy.

"Buyers will need to be aggressive in order to secure production through acquisitions via the public auction process," Mr. Heinz said in a report yesterday.

Mr. Theal estimated a range of $4-billion (Canadian) to $4.5-billion for Anadarko's Canadian holdings.

The Canadian assets produce about 70,000 barrels of oil a day, before royalties. He said the company will probably be sold in two or three pieces.

Most of the output is natural gas in hot areas such as the Deep Basin near Jasper National Park in Alberta and northeastern British Columbia. Those will be of great interest to Talisman, which is a big player in those regions, Mr. Theal said.

In southeastern Alberta and southwestern Saskatchewan, Anadarko has shallow gas assets. Mr. Theal thinks large energy trusts such as ARC Energy Trust will compete vigorously for those.

"Properties like ours are in high demand in Canada right now, attracting valuations significantly above those reflected in our stock price," said Jim Hackett, president, chief executive officer and chairman of Anadarko. "This arbitrage opportunity motivates us to essentially trade out of the Canadian operations and into the Kerr-McGee and Western properties."

It will be the biggest deal -- or deals -- since the blockbuster merger of PanCanadian Energy Corp. and Alberta Energy Co. Ltd. that formed EnCana Corp. in 2002, which had an equity value of roughly $20-billion (Canadian).

The last big straightaway takeover for oil and gas properties was in 2001 when Devon Energy Corp. of Oklahoma City paid $5.3-billion for Anderson Exploration Ltd. Also that year, Burlington Resources Inc. of Houston -- now owned by ConocoPhillips Co. -- paid $3.3-billion for Canadian Hunter Exploration Ltd. Anadarko became a major player in Canada when it bought Berkley Petroleum Corp. for $1.2-billion, also in 2001.

Last year, Kinder Morgan Inc., a Houston-based pipeline company, bought Terasen Inc., a Vancouver-based pipeline and power company, for $3.1-billion (U.S.).

About Anadarko: Anadarko is one of the biggest independent oil and gas companies in the world, operating around the globe and generating $7.1-billion (U.S.) in revenue in 2005.