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Canadian oil and gas producer Strathcona Resources raised its offer for MEG Energy on Monday, seeking to outbid Cenovus Energy.
MEG’s Christina Lake oil sands project has become a prize asset in Canada’s energy sector, with its long reserve life, low operating costs and significant potential for production growth making it one of the few large-scale expansion opportunities left on the oil patch.
MEG’s board has backed Cenovus’ offer, which would combine its Christina Lake operations with Cenovus’ adjacent assets, creating one of Canada’s largest oil sands producers with output of more than 720,000 barrels per day.
For Strathcona, a deal with MEG would create a sizable pure-play oil sands producer with the scale and visibility to rival larger peers.
Strathcona said its revised offer values MEG at C$30.86 per share, above the C$27.79 valuation of Cenovus’ August cash-and-stock agreement. Strathcona had proposed C$23.27 per share in its initial hostile bid in May.
The new offer, which expires on October 20, gives MEG an equity value of about C$7.85 billion ($5.68 billion), according to Reuters calculations.
Strathcona, backed by private equity firm Waterous Energy Fund, has been building its position in MEG, disclosing it owns or controls about 14.2% of the company’s shares.
It said the company will vote against the Cenovus transaction at an October 9 shareholder meeting, where two-thirds approval is required.
Strathcona called the Cenovus deal “lopsided” and accused MEG’s board of running a “broken sale process” that excluded its earlier overtures.
The company said Cenovus shareholders had reaped nearly C$3.9 billion in market value gains after the deal was unveiled last month, while MEG investors were left with limited upside.
Cenovus and MEG did not immediately respond to Reuters’ requests for comment.
See the Strathcona Press Release Here
(Reporting by Arunima Kumar and Rishabh Jaiswal in Bengaluru; Editing by Mrigank Dhaniwala and Krishna Chandra Eluri)
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