Shell Canada Ltd., a subsidiary of integrated oil company Royal Dutch Shell, The Hague, The Netherlands, (NYSE: RDS-B) plans to acquire Alberta-based E&P Duvernay Oil Corp. (Toronto: DDV) with holdings in the Montney shale of Alberta for a deal value of approximately C$5.9 billion in cash and debt assumption.

Shell will pay C$83 per Duvernay share, a 36% premium over the 30-day weighted average.

Duvernay holds 450,000 net acres in northwestern Alberta and northeastern British Columbia, including in two large gas projects at Sunset-Groundbirch in British Columbia and the Alberta Deep Basin. Production is more than 25,000 barrels of oil equivalent per day, mostly gas, with plans to increase to 70,000 barrels per day by 2012. Proved reserves are 96 million barrels of oil equivalent (148.2 barrels proved plus probable).

Shell chief executive Jeroen van der Veer says, “Duvernay could become a valuable part of the Shell portfolio, where we can add value through technology and scale. The combination of Duvernay's acreage with Shell's proven operating experience and financing capabilities make this transaction attractive to all shareholders.”

Shell has tight gas production of some 80,000 barrels equivalent per day in North America, including in Western Canada, Wyoming, South Texas and positions in the Haynesville shale in Louisiana and Texas.

Peters & Co. Ltd. is advisor to Duvernay and provided a fairness opinion.

-Steve Toon