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Dana Petroleum to buy Petro Canada Netherlands in largest acquisition yet

Dana Petroleum Plc recently set out plans to buy Petro Canada Netherlands from Petro Canada (International) in a €328m cash deal that represents Dana’s largest acquisition to date. Petro Canada Netherlands operates in the Dutch sector of the North Sea and promises to give Dana a “significant growth step” in a third core area in Europe and a complementary asset base in the North Sea. Shares in the group edged up 0.5% to 1094p on the news. 

The addition of Petro Canada Netherlands will provide Dana with an additional 31m barrels of oil equivalent (mmboe) of proved and probable reserves and 51 mmboe of proved, probable and possible reserves. Further, the company boasts unrisked prospective resources of up to a further 67 mmboe across its portfolio and 20 mmboe on a risked basis. Last year, Petro Canada Netherlands' average daily production was 14,589 boepd, which generated profits before tax of €123.4m.

In the year to April 2010 Petro Canada Netherlands’ net production averaged 12,136 barrels of oil equivalent per day (boepd) with the annual maintenance shut-downs on the De Ruyter and Hanze fields yet to occur. The deal will increase Dana's previous 2010 production guidance by some 10-12% on an annualised basis, subject to timing of deal completion. Dana estimates that its production will increase by 8,000-9,000 boepd in 2011, equivalent to a 20-25% increase in previous guidance, with a production increase of 10,000-14,000 boepd in 2012 as new projects are brought onstream in the Netherlands. The deal will take Dana's total number of producing fields to 54 from 36 currently, as well as bolting on an experienced management team with significant regional North Sea operating experience.

Petro Canada Netherlands has interests in a number of currently producing fields, namely the De Ruyter (54.07%) and Hanze (45%) oil fields, both of which it operates, as well as the Hanze gas field (27%) and a number of non-operated gas interests in the L05b&c (30%) and L08b area (25-30%) operated by Wintershall, and the P15 area (9-11%) and P18 area (0.7-4%) operated by TAQA. In addition, Petro Canada Netherlands has a 12% equity interest in the Alkmaar (NYSE:PGI) gas storage project operated by TAQA. Gas production in the Netherlands has the added benefit of a strong oil price linkage in the commercial gas sales agreements.

Tom Cross, Dana’s chief executive, said: “This transaction represents Dana's fourth international acquisition in the past three years and is the most significant and exciting development in the company's history. It builds upon our portfolio approach to the E&P business and provides a significant production and reserve growth step for the group. In addition, the acquisition adds considerably to our operating capability in the North Sea, better positioning Dana to capitalise on the operated developments emerging from our own organic portfolio and to pursue further operated opportunities in the future. Together with the Dana's emerging gas development potential in the Nile Delta and offshore Morocco, the group will, following completion of the acquisition, be more balanced with an approximately 60:40 oil:gas ratio in terms of 2P reserves and approximately 70:30 oil:gas ratio in terms of near term production.”

The acquisition remains conditional on the approval of Dana shareholders but is expected to complete in the third quarter of 2010. In connection with the deal, and as part of a broader corporate refinancing initiative, Dana has agreed at US$900m term loan and revolving credit facility underwritten by Royal Bank of Canada. 

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