Dana to Take Stakes in Suncor
Dana has entered into an agreement to acquire the entire issued share capital of Petro Canada Netherlands BV from Petro Canada (International) Holdings B.V, a wholly owned subsidiary of Suncor for an estimated net cash consideration of approximately €328 million (approximately £270 million or US $393 million).
The Acquisition is a Class 1 transaction for Dana under the Listing Rules and is therefore conditional on the approval of Dana shareholders. A notice convening the general meeting of Dana's shareholders will be set out in the circular to shareholders of Dana (the "Circular"). The Circular is expected to be published in July 2010 with the general meeting taking place approximately three weeks thereafter. Assuming this condition is satisfied, Dana currently expects the Acquisition to complete in the third quarter of 2010, approximately one month following the publication of the Circular to Dana shareholders.
In connection with the Acquisition, and as part of a broader corporate refinancing initiative, the Company has agreed terms with the Royal Bank of Canada ("RBC") for the provision of US $900 million term loan and revolving credit facility to be fully underwritten by RBC (the "Facility").
Key Acquisition highlights
The Acquisition represents the Company's largest acquisition to date and the Dana Board believes that the Acquisition provides significant operational and financial benefits, including:
- providing Dana with a significant growth step in a third core area in Europe and a complementary asset base in the North Sea
- providing Dana with an additional 31million barrels of oil equivalent ("mmboe") of proved and probable ("2P") reserves and 51 mmboe of proved, probable and possible ("3P") reserves at December 31, 2009, and unrisked prospective resources of up to a further 67 mmboe across the Petro Canada Netherlands portfolio (20 mmboe on a risked basis)
- Petro Canada Netherlands' net production this year, to end April 2010, averaged 12,136 boepd with the annual maintenance shut-downs on the De Ruyter and Hanze fields yet to occur
- increasing Dana's previous 2010 production guidance by some 10-12% on an annualized basis, subject to timing of deal completion. Dana estimates that its production will increase by 8,000-9,000 boepd in 2011, equivalent to a 20-25% increase in previous guidance for the Dana Group, with a production increase of 10,000-14,000 boepd in 2012 as new projects are brought onstream in The Netherlands
- increasing Dana's total number of producing fields to 54 from 36 currently, (this includes 15 new offshore fields and 3 new onshore fields)
- bringing to Dana an experienced management team with significant regional North Sea operating experience, based in The Hague
- has a purchase price equivalent to approximately US $12.16 per barrel of 2P reserves, based on the Adjusted Consideration (discussed further below) and excluding the Alkmaar (PGI) project which has no underlying reserve component
Petro Canada Netherlands has interests in a number of currently producing fields, namely the De Ruyter (54.07%) and Hanze (45%) oil fields which are both operated by Petro Canada Netherlands, the Petro Canada Netherlands operated Hanze gas field (27%) and a number of non-operated gas interests in the L05b&c (30%) and L08b area (25-30%) operated by Wintershall, and the P15 area (9-11%) and P18 area (0.7-4%) operated by the Abu Dhabi National Energy Company ("TAQA"). In addition, Petro Canada Netherlands has a 12% equity interest in the Alkmaar ("PGI") gas storage project operated by TAQA. Gas production in the Netherlands has the added benefit of a strong oil price linkage in the commercial gas sales agreements.
The Dana Board believes that Petro Canada Netherlands has a proven track record in operations and project development as a self-sufficient operating company. This has been driven by rigorous and well established management systems and health, safety and environment procedures and protocols, and is supported by a highly experienced and well qualified work force.
The Dana Board believes that there is the opportunity to create significant additional value for Dana shareholders from the existing Petro Canada Netherlands portfolio. The Dana Board anticipates that this would be achieved via developments in the core areas and exploration centered around existing infrastructure hubs. Medway in the De Ruyter Area offers near term production through an integrated oil and gas development with start up planned for 2012. The recent L06-B HPHT gas discovery should provide further reserves growth in the L05, L06, L08 areas, whilst the L06-LS5 exploration prospect, which is currently being drilled, should also provide further upside potential.
Full details of Petro Canada Netherlands' reserves and resources, including an independent economic evaluation thereof, will be set out in a Competent Person's Report on Petro Canada Netherlands to be included within the Circular.
Finance for the Acquisition and for the Group's ongoing corporate requirements will be provided by RBC, through a fully committed and underwritten US $900 million Facility comprising a four year term loan of US $300 million and a five year US $600 million revolving credit facility, which the Dana Board believes have been procured on competitive terms. The Facility, which will be syndicated in due course, has been sized to provide funding for the Company's anticipated development spend profile over the coming years in connection with the Western Isles and Barbara/Phyllis projects in the UK; to provide capacity to re-finance the Group's convertible bond should bondholders exercise the investor put in July 2012; to provide for up to $50 million of letters of credit and for general corporate purposes.
Availability of the Facility is subject to terms and conditions typical for a facility of this nature, including the finalization of the Facility documentation and satisfactory conclusion of due diligence by RBC.
Commenting on the Acquisition, Tom Cross, Chief Executive Officer of Dana, said, "This transaction represents Dana's fourth international acquisition in the past three years and is the most significant and exciting development in the Company's history. It builds upon our portfolio approach to the E&P business and provides a significant production and reserve growth step for the Group. In addition, the Acquisition adds considerably to our operating capability in the North Sea, better positioning Dana to capitalize on the operated developments emerging from our own organic portfolio and to pursue further operated opportunities in the future. It also extends our existing UK gas business, providing a European gas context and a first time exposure to gas storage technology and opportunities. Together with the Dana's emerging gas development potential in the Nile Delta and offshore Morocco, the Group will, following completion of the Acquisition, be more balanced with an approximately 60:40 oil:gas ratio in terms of 2P reserves and approximately 70:30 oil:gas ratio in terms of near term production.
We are also further developing our relationship with RBC, first established with the Bow Valley acquisition in 2009. RBC has agreed to underwrite the debt facility for the Acquisition. This facility will address our financing needs for the foreseeable future, whilst allowing us to drive forward our exploration program and to continue to review selected value-adding growth opportunities.
RBC Capital Markets is joint financial adviser on the transaction alongside RBS Hoare Govett. Going forward, RBS Hoare Govett and RBC Capital Markets will be joint brokers to Dana and we look forward to building upon these relationships."