Alberta Energy Co. Ltd. increased its North American natural gas reserves to 5.4 trillion cubic feet when its AEC Oil & Gas (USA) Inc. subsidiary bought McMurry Oil Co., a private Wyoming independent, and other private interests for C$910 million. The purchase is a departure from tradition, which has U.S. oil companies purchasing Canadian companies and assets. AEC Oil and McMurry own a major interest in the Jonah Field, one of the largest gas holdings in the U.S. Rocky Mountains. The deal brings Alberta Energy an estimated 1.2 trillion cu. ft. equivalent of proved and probable reserves. The Calgary independent also offered to purchase an additional 6% working interest from other owners. Discovered in 1993, Jonah is a 3-trillion-cu.-ft. field producing sweet gas, making it one of the largest gas discoveries in North America. In the last 20 years, the largest natural gas discovery in Canada was the 1.7-trillion-cu.-ft. Caroline Field, which produces more costly sour gas. "Based on our detailed review, these assets are the highest quality gas assets currently available in North America," Alberta Energy president Gwyn Morgan said. "Natural gas market fundamentals continue to strengthen. This acquisition establishes a new platform for growth in the northern U.S. Rockies, a strategic focus area, enhancing our leadership position in the exploration and development of natural gas in North America." The deal is one of several large transactions involving Canadian companies. Petrobank Energy & Resources Ltd. is offering C$1.6 billion for Ranger Oil Ltd. Calgary-based Ulster Petroleums Ltd. will be taken over by Anderson Exploration Ltd. for C$647 million, consisting of C$543 million cash and 4.77 million of Anderson shares. Unocal Corp. is seeking to buy out Northrock Resources Ltd., of which it already owns 48%. Industry observers aren't the least bit surprised. Balance sheets that were weakened by nearly 18 months of depressed crude-oil prices and high-interest debt created attractive acquisition opportunities on both sides of the border. U.S. independents that kept their financial powder dry get an added bang from the difference between the Canadian and U.S. dollar. It makes sense for U.S. independents to look toward Canada for several other reasons, according to William Featherston, who recently joined PaineWebber Inc. in New York as its E&P analyst. "First, the natural-gas basis differential that plagued independents there through the 1990s has shrunk," he says. "Second, prices should be pretty strong for a while because there's already excess pipeline capacity and the Alliance system will come on stream later this year. Canadian independents also haven't ramped up production dramatically, so that should help keep prices steady too. "Third, Canadian independents traditionally trade at a discount to their U.S. counterparts. Finally, Canada also has a lower well density than the United States because it hasn't been explored as extensively. That should make it possible to grow assets more quickly." -Nick Snow
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