Deals of the Week – Pembina and Provident Merge in $3.6 Billion Midstream Deal

The largest deal in a lacklustre week for E&P deals came from PetroBakken’s divestiture of its 2.2% interest in the Weyburn unit in Saskatchewan for C$105 million. The deal breaks a hiatus in M&A for PetroBakken who following 3 transformation deals composed of the acquisitions of Berens Energy, Result Energy and Rondo Petroleum in 2010 for a combined total of over $1 billion, made few further moves as either an acquirer or seller ever since. The metrics of the deal look to favour PetroBakken who received $23 per proved and probable boe, representing an earnings multiple of 9 based on the annualised cash flow from the interest.

Away from E&P there was still a major billion dollar deal conducted in the midstream sector during the week which was comprised of Pembina Pipeline Corp taking over Provident Energy in an all share deal worth $3.6 billion, representing a 25% premium over the share price of provident a day prior to the announcement. The deal will combine Pembina’s 7,500 km of pipelines across Canada with Provident’s large asset base of NGL extraction and marketing.

In Kurdistan, as one company expanded its operations in the controversial region another abandoned part of theirs. Genel were already heavily involved in Kurdistan through various stakes but they further demonstrated their confidence in the region by acquiring a 40% stake in the Chia Surkh exploration asset from Longford Energy for $68 million. Meanwhile, ShaMaran relinquished half of their exploration assets in the region by handing their 60% interest in the Arbat and Pulkhana production sharing contracts back to the Kurdistan Regional Government and paying $25 million to release themselves from further obligations for the blocks that have not performed in line with the company’s expectations.

In Norway, the Ministry of Petroleum and Energy released the results of their APA 2011 awards this week, which involved 42 companies taking stakes in licenses on the Norwegian continental shelf. Unsurprisingly, it was the domestic companies of Statoil ASA, Spring Energy, Det Norske and NORECO who snapped up the most licenses with Statoil alone taking an interest in 11 licenses.

In its annual trading update, Tullow Oil revealed a deal with supermajor Royal Dutch Shell which doesn’t involve any immediate transfer of assets but will ally the two companies in the future exploration of frontier basins. The move by Shell aims to tap into Tullow’s excellent exploration performance which has led to large discoveries in Ghana, Uganda and more recently French Guiana whilst Tullow will benefit from the decreased risk that will arise from having a well capitalized company to partner them in their riskier plays.

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