AEC and PanCanadian Confirms Merger Plans

Two Canadian energy companies confirmed they would join forces in a "merger of equals" and form one of the world's biggest independent oil and gas firms.

Alberta Energy Company Ltd. (AEC) and PanCanadian Energy want to merge into a new Calgary-based entity called EnCana Corp.

The merger is a share swap. AEC shareholders would receive 1.472 shares of PanCanadian for each common share of AEC they own. If the deal is approved, EnCana would manage one of the largest proven energy reserves of any independent company – 7.8 trillion cubic feet of natural gas and 1.3 billion barrels of oil and liquids.

"We have decided to come together as equals from positions of strength so that we can achieve a stronger future in this highly competitive marketplace," said David O'Brien, PanCanadian chairman and chief executive officer.

Some layoffs are expected but AEC's current CEO, Gwyn Morgan, downplayed any short-term cuts. "This isn't about job cuts, and this isn't about getting smaller and trying to squeeze out costs in the company – there will be some of that," Morgan told a news conference in Calgary. "We're talking about one of the highest growth companies, if not the highest growth company, in the business." O'Brien said the merger will allow the $27 billion company to compete effectively on a global basis.

He plans to chair EnCana's board, which will have an equal number of directors from each company. Morgan would be president and chief executive officer of the new company. The proposed merger must be reviewed by regulators. Shareholders of both firms also have to approve the plan. They're expected to vote on the plan at a meeting in April.

PanCanadian Energy is one of the largest cash generators in the Canadian oil patch, and had been considered a potential takeover target. Alberta Energy is a major natural gas producer.