Poland's state-controlled PKN Orlen SA is growing its presence in North America.

PKN Orlen said Oct. 13 it has entered into merger agreements with Canada's Kicking Horse Energy Inc. and Salt Lake City-based FX Energy Inc. (FXEN). Orlen Upstream, the refiner's E&P subsidiary, will acquire all the outstanding shares of both companies' common stock for more than $300 million.

PKN currently buys most of its oil from neighboring Russia, and these deals would expand its E&P activities, according to a Reuters report.

"In line with our strategy in the upstream segment, we're aiming at achieving a production potential of 6 million boe a year in 2017," said Jacek Krawiec, president and CEO of PKN, in a statement.

PKN first entered North America in 2013 through the acquisition of Canada's TriOil Resources Ltd., which was active in the Cardium and Montney shale plays in Alberta.

Through its latest takeovers the company will add to its holdings in Canada's shale plays plus gain U.S. producing assets.

In addition, PKN will establish an E&P position in Poland with the acquisition of FX Energy. The company has concessions in Poland with its partner, the state-owned PGNiG, plus U.S. assets in Montana and Nevada.

FX Energy's agreement with PKN is the result of a thorough process conducted with the company's financial adviser, said David N. Pierce, FX Energy president and CEO. In August, the company said it began exploring a possible sale of the company.

In the transaction, holders of FX Energy common stock will receive $1.15 per share in cash. The deal represents a 22% premium over the average closing price for its stock for a 60 trading-day period that ended on Oct. 12, according to the release.

Including net debt, FX Energy is valued at about $119 million.

"This transaction provides the best opportunity to deliver value to our stockholders in view of the challenges we face with the current commodity-price environment, currency exchange-rate fluctuations and our current capital structure and limited access to the capital necessary to realize the value of our assets in Poland," Pierce said in a statement.

In its deal for Kicking Horse, PKN will acquire all of the outstanding common shares of the company for C$4.75 per share in cash. This represents a 47% premium to the most recent closing price of its shares, according to the release.

The total transaction value, including Kicking Horse's net debt, is about C$356 million (US$273.7 million).

"This transaction represents a continuation of our strategy to grow our Canadian business, both through development of our existing lands and acquisitions of the right assets," said Matt Rees, president of Orlen Upstream Canada, in a statement.

Kicking Horse has an extensive land position and producing assets in the Montney tight gas play in the Deep Basin of Alberta. Production during the second quarter averaged 3,034 barrels of oil equivalent per day (boe/d).

Rees said by using the "significant financial capacity of PKN Orlen," the company expects to accelerate production and the development of Kicking Horse's asset base in order to fully realize its potential.

The company also has ownership in Pieridae Energy, an energy infrastructure development company. The company is currently seeking to build an LNG facility at Goldboro, Nova Scotia.

BMO Capital Markets is PKN's financial adviser for the Kicking Horse deal, and Norton Rose Fulbright Canada LLP is its legal counsel. AltaCorp Capital Inc. and Canaccord Genuity Corp. are financial advisers to Kicking Horse, and Burnet, Duckworth & Palmer LLP is its legal counsel.

The deal will be subject to approval by at least 66.75% of the votes cast at an annual and special meeting of Kicking Horse's shareholders and option holders. The transaction is expected to close in late November or early December.

FX Energy's financial adviser is Evercore Group LLC. Bracewell & Giuliani LLP and Kruse Landa Maycock & Ricks LLC are its legal counsel. The transaction is expected to close in the fourth quarter of 2015 or the first quarter of 2016.

Contact the author, Emily Moser, at emoser@hartenergy.com.

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