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Advantage Oil & Gas Ltd. (AAV), the fifth- largest producer in Canada’s Montney shale formation, rose the most in more than three years after announcing it’s seeking a buyer for some assets to simplify its structure and prepare the company for a potential sale.
Advantage, based in Calgary, gained 13 percent to C$3.69 at 1:45 p.m. in Toronto, the biggest climb since July 2009. The shares have dropped 13 percent this year.
Advantage has retained RBC Capital Markets to sell its non- Montney production assets, the company said in a statement yesterday after the close of regular trading on North American markets. Advantage expects to begin the process for a potential sale of its Montney natural-gas and natural gas liquids holdings by the end of the year.
“I’m not surprised there is some surprise in the market,” Chief Executive Officer Andy Mah said in a phone interview today. He declined to say if a potential buyer has approached the company yet. A “large firm” may be interested in acquiring Advantage and would have more money to spend in the Montney, Mah said.
Advantage has 1.1 trillion cubic feet of proved and probable gas reserves in the Montney formation, which stretches across Alberta and British Columbia. The area is a potential supply source for proposed liquefied natural gas export projects along Canada’s Pacific Coast. Mitsubishi Corp. and Malaysia’s Petroliam Nasional Bhd have recently bought into the Montney shale, with an eye on exporting the fuel.
Investors are buying shares because Advantage is “cleaning up the company,” said Robert Fitzmartyn, a Calgary-based research analyst at FirstEnergy Capital Corp. who owns Advantage shares and rates them the equivalent of a buy. “People should be cautious based on the failed sale process nearby of Birchcliff.”
Birchcliff Energy Ltd., another Calgary-based company with holdings in the Montney, in March ended a sale process started five months earlier after not receiving an acceptable offer.
Advantage is the fifth-largest producer after Encana Corp., Murphy Oil Corp., ARC Resources Ltd. and Royal Dutch Shell Plc, according to a July investor presentation on its website.
The company, which last year created Longview Oil Corp. (LNV) to hold its oil-rich assets, will retain its 45 percent stake in the producer after the initial asset sale.
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