Yesterday, Exxon Mobil (NYSE: XOM) announced that it would purchase Canadian oil and gas company Celtic Exploration (TSE: CLT) in a $3.1 billion cash and stock deal, part of the company’s continued efforts to expand into the enticing shales of western Canada.
Terms of the transaction indicate that Exxon will be paying 24.50 Canadian dollars ($24.92) per share, or a 35 percent premium on Celtic’s Tuesday closing price. The price is also 34 percent above Celtic’s 30-day volume-weighted average stock price, the New York Times reports.
Current Celtic shareholders stand to receive 0.5 of a share in the new company, to be led by the current management team. Those investors holding convertible unsecured subordinated debentures will have those replaced by equivalent common shares, which in turn will be exchanged for 24.50 Canadian dollars and 0.5 of a share in the new company.
Celtic is based in Alberta, one of Canada’s leading shale regions; it’s been under focus by several international oil and gas companies. China’s Cnooc bid $15 billion in July for Nexen (TSE: NXY), a larger explorer based in Calgary.
Exxon, benefiting from its $31 billion purchase of XTO Energy in 2009, may well discover a sizable profit through this acquisition of Celtic.
Exxon now has access to the Montney and Duvernay shale formations, which together produce around 72 million cubic feet of natural gas and 4,000 barrels of crude, condensate, and other liquids each day. The area may hold as much as 128 million oil equivalent barrels of proved and probable reserves.
A sustained low period for natural gas prices means Celtic saw a near-25 percent drop in shares over the last year, but after the Nexen deal recently, it was widely anticipated that Celtic would present an attractive candidate for a similar takeover.
The deal currently awaits approval by Celtic shareholders, debenture holders, and Canadian regulatory personnel.
Celtic shares jumped 45% on the news. Exxon was up 1% on Wednesday.