CALGARY (CP) -- Petrobank Energy and Resources Ltd. [TSX:PBG] is buying Peerless Energy Inc. [TSX:PRY.A] in a friendly deal valued at about C$334 million. Both Calgary-based companies are involved in the Bakken play in southeastern Saskatchewan. Combined, the two companies' current production from the Bakken play is approximately 7,900 barrels of oil per day.
''This acquisition further strengthens Petrobank's Bakken growth potential by adding 18 net sections of undeveloped land and current production of approximately 1,900 bopd,'' the companies said in a release late Thursday.
''The Peerless assets will complement Petrobank's Bakken facility and infrastructure plans, allowing us to recover natural gas and liquids production while minimizing operating costs.''
Peerless also produces natural gas from Alberta and British Columbia and has more than 100,000 net acres of undeveloped land.
The acquisition was valued at about C$334 million, including debt and transaction costs.
As part of the arrangement, each class A share of Peerless will be exchanged for 90 cents cash and 0.08 of one Petrobank common share and each class B share of Peerless will be exchanged for C$10 cash.
Based on the five-day weighted average share price of Petrobank ending on November 22, 2007 of C$54.33 per share, the effective price per Peerless class A share is C$5.25, the companies said.
Prior to Thursday's announcement, Peerless class A shares closed at C$5.20, while it's lower-volume class B shares closed at C$8.35 on the Toronto Stock Exchange.
Petrobank shares closed C$53.40 on the TSX Thursday.
The deal prohibits Peerless from soliciting any other bids and includes a C$12.5 million break fee.
It also requires approval of Peerless shareholders, court and regulators.
Peerless shareholders will vote on the deal at a special meeting be held in January 2008.
''The board of directors of Peerless concluded that the transaction is in the best interests of the Peerless shareholders from a financial perspective and resolved to recommend that shareholders vote their shares in favour of the arrangement,'' the company said in the joint statement Thursday.
It also said the directors and officers of Peerless have lock-up agreements with Petrobank to vote in favour of the deal.
Petrobank recently reported its third-quarter profit increased by more than 300% and production doubled from the same period last year.
Profit was C$21 million or 25 cents per share compared to C$5.2 million or seven cents per share in the same period last year. Production was 9,935 barrels of oil equivalent per day compared to 4,939 boepd in the third quarter of 2006.
Petrobank is a oil and natural gas exploration and production company with operations in Western Canada and Colombia. It has a nearly 77-per-cent stake in Petrominerales Ltd. [TSX:PMG], a Latin American-based exploration and production company producing oil from three blocks in Colombia.
Peerless is a junior oil and gas company engaged in the exploration for, and development and production of, natural gas and light oil reserves primarily in the provinces of Alberta, Saskatchewan, and B.C.
In July 2006, Peerless announced a friendly takeover of Valiant Energy Inc. in an all-share deal that the two companies then-valued at C$78.8 million.
(c) The Canadian Press 2007
