2009-09-21-2009-08-03-2009-08-03

Bought company with operations in Western Canada, U.S. Rockies, North Sea, Libya, Syria, Trinidad & Tobago, gaining 418,400 BOE/d, 2.35 BOE 2P.

Oil-sands explorer Suncor Energy Inc., Calgary, (NYSE; Toronto: SU) has completed its acquisition of Calgary's Petro-Canada (NYSE: PCZ; Toronto: PCA) for approximately C$19 billion (US$15.5 billion) in a stock-for-stock transaction, creating Canada's largest energy company. Including Petro-Canada's year-end 2008 debt of C$4.75 billion and C$1.45 billion of cash on hand, the total deal value is approximately C$22.5 billion (US$18.3 billion). "This is an important milestone for Suncor and for Canada," says Rick George, president and chief executive of the new Suncor. "Bringing together these two great success stories creates the premier Canadian energy company with the assets, people and financial strength to take on the global competition. This is the start of an exciting journey." The merged company retains the Suncor name, while maintaining the Petro-Canada brand in refined products. Suncor Energy becomes the fifth largest North American-based energy company by market value. Suncor offered 1.28 common shares per Petro-Canada share. Suncor shareholders own approximately 60% of the merged company. Petro-Canada production for 2008 was 418,400 barrels of oil equivalent per day including 59,900 barrels from oil sands, 240,800 barrels from oil, and 706 million cubic feet of gas. Proved plus probable reserves were 2.35 billion barrels equivalent with an additional 8.9 billion equivalent contingent resources for a total 11.27 billion barrels equivalent. Refining capacity was 255,000 barrels per day. Petro-Canada's upstream operations consisted of gas production in Western Canada and the U.S. Rockies; oil sands operations in northeastern Alberta; production offshore Newfoundland and Labrador; and E&P operations in the North Sea, Libya, Syria and Trinidad and Tobago. Western Canadian gas production averaged 562 million cubic feet per day in 2008. U.S. Rockies gas production averaged 103 million per day from coalbed-methane fields in the Powder River Basin and in the Denver-Julesburg Basin. Petro-Canada's major oil-sands interests include a 12% ownership in the Syncrude joint venture, 100% ownership of the MacKay River in situ bitumen development, a 60% ownership in and operatorship of the proposed Fort Hills oil-sands mining project, and extensive prospective oil-sands acreage. Petro-Canada estimated it had 1.2 billion barrels of total oil-sands proved plus probable reserves and 9.5 billion barrels of total contingent and prospective oil-sands resources. The combined company's current upstream production is approximately 710,000 barrels of oil equivalent per day. Proved and probable reserves are 7.5 billion barrels of oil. Refining capacity is 433,000 barrels per day. The merged company's board includes eight members from Suncor's board and four members from Petro-Canada's. John Ferguson, Suncor chairman, will serve as chairman of the merged board. The merged company 's shares will trade on both the Toronto and New York stock exchanges as SU. CIBC World Markets and Morgan Stanley are financial advisors and Blake, Cassels and Graydon LLP are legal counsel to Suncor. RBC Capital Markets and Deutsche Bank are financial advisors to Petro-Canada while Macleod Dixon LLP is legal counsel. Analysts at Tudor, Pickering, Holt & Co. Securities Inc. valued the deal at a 30% premium and suggest the merger is "a sign of the times" involving no cash and targeted C$300 million in annual operating cost savings. "This deal…could signal the beginning of stock-for-stock deals in energy land."