Devon Energy to acquire Canada's Northstar

Devon Energy Corp., Oklahoma City, has agreed to acquire Northstar Energy Corp., Calgary, in a $1.3 billion (Canadian) stock and debt assumption merger offer.

The new company, with 47% of its reserves in Canada and 53% in the U.S., would have total proven reserves of 1.2 tcf of natural gas and 117 million bbl of oil. The combined company would hold an aggregate 2.5 million net acres of undeveloped leasehold.

The combination would result in one of the top 20 U.S.-based independent producers in terms of U.S. production and Tier 1, top 20 producer in Canadian oil and gas production.

Companies' details

Devon estimates its 1998 production at 20,800-24,100 b/d of oil and natural gas liquids and 184-215 MMcfd of natural gas. Northstar estimates 1998 production at 16,000 b/d of oil and 185 MMcfd of natural gas.

Devon's U.S. properties are located primarily in the Permian basin, San Juan basin, the Rocky Mountain region and the Midcontinent. It has proven U.S. reserves of 568 bcf of gas and 73 million bbl of oil and natural gas liquids. It also has properties in the Peace River arch of Alberta with reserves totaling about 48 bcf of gas and 8 million bbl of oil and NGL.

Northstar properties are located primarily in Alberta and Northeast British Columbia, with total proven reserves of 550 bcf of natural gas and 36 million bbl of oil and NGL.

Deal status

The deal has been endorsed by the boards of both companies but must still be approved by shareholders.

The friendly takeover offer is the equivalent of $12.17 (Canadian)/share for Northstar and 25% above Northstar's recent closing price. Devon would assume Northstar's $455 million (Canadian) debt. Devon plans to issue 15.4 million common equivalent shares to finance the deal. Northstar shareholders would receive 0.227 fractional Devon common equivalent shares for each Northstar share.

The agreement provides for termination fees and a downside collar to compensate for any changes in Canada/U.S. exchange rates.

Northstar will continue to operate as Northstar, and CEO John Hagg will continue to run Canadian operations. Larry Nichols, president and CEO of Devon, would be president and CEO of the combined company.