Bonavista Expands Natural Gas Holdings

Mar.24.10 | About: Bonavista Energy (BNPUF)

By Andrew Willis

Market darling Bonavista Energy Trust (OTCPK:BNPUF) put its premium-priced units to work on Wednesday by selling $177 million of equity to fund a $228 million purchase of natural gas-heavy properties in Alberta.

Bonavista, a trust with a $3.6 billion market capitalization, is one of several mid-tier Canadian energy companies that’s actively acquiring assets, at a time when the price of natural gas is rallying. The company is buying properties near Whitecourt, Alta., that are next door to fields that Bonavista has already developed.

This energy trust sports units that trade at a premium to peers, based on metrics such as the trust’s enterprise value versus its projected cash flow, or the price compared to the trust’s net asset value. Bonavista has also been a top performer in the sector, year-to-date. That valuation justifies issuing equity to fund acquisitions.

Bonavista raised $177 million early Wednesday by selling 7.5 million units at $23.60 each to a syndicate of investment banks led by CIBC World Markets and TD Securities. The units last changed hands at $24.18 on Tuesday, so the new equity was sold at a relatively thin 2.4% discount to where the trusts was trading.

CIBC World Markets was the sole advisor to Bonavista on the acquisition.