Petronas Buys Progress

Transaction Type
Announce Date
Post Date
Close Date
Estimated Price

Petronas, the Malaysian national oil and gas company, plans to buy Progress Energy Resources Corp. (Toronto: PRQ) for C$20.45 per share in a deal valued at approximately C$5.5 billion when all of Progress’ outstanding convertible debentures are included.

The transaction price represents a premium of 77% over Progress’ closing share price on the Toronto Stock Exchange of C$11.55 on June 27, 2012, and 83% over Progress’ 30-trading day volume weighted average trading price of C$11.18 per share ending on June 27, 2012.

Progress, based in Calgary, develops and produces large unconventional natural gas resources in northeast British Columbia and northwest Alberta. Progress holds the largest acreage position in the Montney shale gas play.

In June 2011, Petronas formed a joint venture with Progress to develop a part of Progress’ Montney shale assets in northeastern British Columbia. Under the terms of that arrangement, Progress sold 50% of its working interest in Altares, Lily and Kahta properties to Petronas for about C$1.07 billion.

Last year’s deal was an effort to explore opportunities to develop export markets for Canadian liquefied natural gas. The announcement this year is expected to boost Petronas’ potential as an exporter of LNG from the west coast of Canada.

“The proposed transaction will combine PETRONAS’ significant global expertise and leadership in developing LNG infrastructure with Progress’ extensive experience in unconventional resource development to build a strong and growing world class energy business based in Canada,” said Datuk Anuar Ahmad, executive vice president of the gas and power business for Petronas.

The joint venture has selected a site in Prince Rupert, British Columbia for its planned LNG export facility on the west coast of British Columbia and plans to conduct a feasibility assessment agreement with the Prince Rupert Port Authority.

“Our asset base requires extensive capital to develop its large potential and ultimately access international LNG markets. Petronas offers the size and scale that will enable our company to continue to grow and not be limited by the same cash flow challenges faced by many producers in the North American natural gas market today,” says said Michael Culbert, President and chief executive of Progress Energy.

Progress’ board has decided that no Progress common shares will be made available for issuance from treasury nor will additional Progress common shares be purchased on the market in connection with Progress’ dividend reinvestment plan effective immediately. As a result, no Progress common shares will be available under the dividend reinvestment plan in connection with the dividend announced on May 1, 2012, which will be paid on July 16, 2012 to shareholders of record on June 30, 2012 and will be the last dividend paid prior to the closing of the transaction.

The transaction is expected to close on Sept. 25, 2012. Petronas’ financial advisor for the transaction is Bank of America Merrill Lynch. Norton Rose Canada LLP is acting as legal counsel to Petronas. BMO Capital Markets is acting as exclusive financial advisor to Progress.