Progress Energy Trust agreed to acquire oil and gas fields in northeast British Columbia and northwest Alberta for C$390.3 million ($330.7 million), boosting production by a third.
Progress Energy will gain production of 6,400 barrels of oil equivalent a day through its acquisition of a closely held company, the Calgary-based company said today in a statement.
The fields are 95 percent natural gas and add to the trust's production of about 18,000 barrels of oil equivalent a day, said Progress Energy spokesman Greg Kist in a telephone interview. The purchase will almost double the trust's undeveloped exploration property in the area to 600,000 acres.
``This is very much an exploration-and-production company type of acquisition, this is really an ideal fit within our own backyard,'' Kist said.
Progress Energy's production will be about 87 percent natural gas once the transaction is completed, up from 80 percent, Kist said. The company is increasing its natural-gas holdings at a time when prices are dropping. Natural-gas prices have fallen about 15 percent in the past year in New York.
The trust said it bought production for the equivalent of C$49,800 barrels of oil day. The average transaction price in the fourth quarter ranged between C$50,000 and C$55,000, based on data prepared by Calgary-based Sayer Energy Advisers.
Progress financed the acquisition by selling 21 million subscription receipts to a group of banks for C$12 each, raising C$252 million. Bank of Montreal, the Canadian Imperial Bank of Commerce, Bank of Nova Scotia and Royal Bank of Canada, are leading the banking group, the trust said.
Progress is issuing the receipts at a 3.2 percent discount to its share price today of C$12.40 before trading was halted on the Toronto Stock Exchange.
Asset purchases by trusts had slowed since Oct. 31 when the Canadian government announced plans to begin taxing them for the first time in 2011. The tax raises costs for trusts to finance transactions and reduces the value of their units.
In October, Canadian Finance Minister Jim Flaherty said to stem a loss of tax revenue new trusts would immediately be taxable and existing trusts are grandfathered until 2011. Income trusts avoid most corporate taxes by paying their cash flow to investors as monthly dividends.
BMO Capital Markets, the investment banking arm of the Bank of Montreal, advised Progress on today's transaction.
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