State-owned oil company Korea National Oil Corp. (KNOC) plans to acquire Canada’s Harvest Energy Trust, Calgary, (Toronto: HTE.UN; NYSE:HTE) for approximately C$4.1 billion in cash and debt.

KNOC will pay C$10.00 per Harvest unit for total cash consideration of approximately C$1.8 billion plus the assumption of C$2.3 billion of Harvest debt. The price represents a 47% premium over the 30-day weighted average through Oct. 20.

Harvest is an integrated oil company with upstream operations and downstream refining and marketing operations. Upstream operations are concentrated in the Chedderville, Crossfield, Bellshill, Lloydminster, Wainwright, Suffield and Red Earth areas of Alberta; the Kindersley and Kenosee areas of Saskatchewan; and the Hay River area of British Columbia. Production is 51,000 bbl. of oil per day (71% oil). Proved plus probable reserves are 219.9 million bbl. of oil equivalent as of year-end 2008. Upside includes more than 500,000 acres of undeveloped land and more than 1,000 drilling locations.

Downstream operations include an 115,000-bbl.-per-day medium sour hydrocracking refinery in Newfoundland.

KNOC president Young-won Kang says, “Korea National Oil Corp. is excited about this acquisition and believes Harvest is a perfect fit for KNOC’s North American growth strategy. KNOC has ambitious plans for future growth and is committed to a long-term investment strategy in Canada.”

KNOC has agreed to a noncompletion fee of C$100 million. Harvest had planned to convert from a trust model to a corporate structure by year-end 2010 in advance of Canadian laws affecting trusts.

TD Securities Inc. is advisor to Harvest and has provided the board with a fairness opinion. Bank of America Merrill Lynch is advisor to KNOC.

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