PanCanadian Petroleum Ltd., Calgary, emerged as top bidder for Butte, Mont.-based Montana Power Co.'s oil and gas assets, offering C$702 million (US$475 million), cash. PanCanadian will finance the deal with C$200 million of available cash and a C$500-million debt facility. "We are effectively expanding our major core area with highly prospective lands similar in size to our prolific Pallister block," said PanCanadian president David Tuer. "The Montana Power assets clearly fit our strengths and allow us to employ our expertise in developing long-life reserves of shallow and medium-depth natural gas. The potential in these assets is significant, and during the next few years, we will add substantially to PanCanadian's daily natural gas production." While reaction to the deal generally was positive, there were a few skeptics. "I thought it was a little expensive for what PanCanadian got," one Calgary oil investment analyst said. "I'm not sure that these would be perceived as very high quality assets. PanCanadian really stepped up and paid for these properties. But when a company has so much undeveloped land and buys more acreage, the question becomes why it doesn't develop what it already has." Others were more enthusiastic. "There's no question that it's a good fit," said Ken Croft of HSBC Securities (Canada), Calgary. "It fills in some of PanCanadian's southern Alberta acreage positions. To some extent, the Montana properties are an extension of this. There also probably is upside in the properties that Montana Power probably wouldn't have realized, especially with its recent mandate. [The company plans to change its name to TouchAmerica and leave the energy business completely.] Often, utilities' oil and gas divisions go through periods when capital is restrained." "It's a very good fit," said Steve Calderwood of Salman Partners, Calgary. "I consider it an expansion of the company's core shallow-gas area. The type of land in Montana is very similar to PanCanadian's existing shallow-gas properties. The size of what it already has provides almost immediate synergies, while the midstream assets, including three cross-border pipelines, should improve PanCanadian's marketing strategies." Production and reserves account for the lion's share of the purchase price-C$520 million. The marketing and midstream holdings represent C$135 million, while the undeveloped land represents C$40 million and working capital accounts for C$7 million. -Nick Snow