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Junior gas firm rejects Petro Canada takeover bid;
New Brunswick Telegraph-Journal
Fri 26 May 2006
Page: C3
Section: Money
Byline: By James Stevenson Canadian Press
Source:
Canada Southern Petroleum's board (TSX:CSW) rejectedPetro-Canada's unsolicited, $113-million-US takeover bid Thursday, saying the offer fails to recognize the "strategic value" of its Arctic natural gas assets.
Two weeks afterPetro-Canada (TSX-PCA) ended negotiations with the junior gas producer and put the hostile bid directly to its shareholders, Canada Southern has opened a data room to encourage white knight bidders to trump the $7.50 US per-share offer.
Calgary-based Canada Southern also questionedPetro-Canada's urgency in completing the deal, suggesting the big integrated oil company was eyeing vast natural gas reserves located in Canada's Arctic to supply its proposed gas terminal in Quebec.
"We believePetro-Canada's offer is financially inadequate and fails to recognize the economic and strategic value of Canada Southern's Arctic assets," Richard McGinity, Canada Southern chairman, said Thursday.
"At a time when geopolitical instability in Nigeria, the Middle East, Russia and South America is threatening the supply of oil and natural gas, the Arctic Islands are coming to the fore as a significant, discovered and secure resource with the potential for ready access to key North American markets, including throughPetro-Canada's proposed (liquefied natural gas) plant at Gros Cacouna, Que."
Canada Southern has a small amount of conventional gas production from acreage in the Yukon, northeastern B.C. and Southern Alberta.
But the main attraction is the company's stake in the Arctic islands — and its interest in seven discovery licences — that it now shares withPetro-Canada. Its interests in the Arctic cover more than 710 square kilometres and its natural gas estimates there were made 21 years ago, back in 1985.
Mr. McGinity told analysts Thursday that independent reserve estimates for the Arctic islands ranged as high as 20 trillion cubic feet of gas. "That is a large field by any measure."
While Arctic island gas reserves are currently stranded with no way to get to markets, Canada Southern believes they will soon be "economically viable," by liquefying it and shipping it on tankers to terminals across North America.
Petro-Canadadenied that it is eying Arctic gas for its Gros Cacouna plan, even though the company is still without import supply as negotiations with Russian giant Gazprom enter a second year and appear to have a long way to go.
"It's public record that our Gros Cacouna plant is scheduled to be on stream in 2009. That would be well before any potential Arctic development," spokeswoman Michelle Harries said Thursday.
Petro-Canada, as a successor to the Government of Canada's interests in the Arctic, holds most of the seismic and geological data relating to the Arctic lands in question. And instead of sharing that information fully with Canada Southern, it presented a takeover proposal with a tight timeline, the company said.
"In response,Petro-Canadaindicated that it was not willing to entertain a negotiated transaction that 'did not align with its timing goals,"' said Mr. McGinity.
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