Deals in close-knit oil patch expected to take hostile turn

Recent slump in natural gas price blamed

CANADA – The era of friendly deals in the oil patch is coming to a close, as experts predict a spike in hostile takeovers in coming months.

Two Calgary-based energy companies are the target of unwanted bids — Canada Southern Petroleum Ltd. and SignalEnergy Inc. Analyst Tom Pavic, vice-president of merger and acquisition consultant Sayer Energy Advisors, sees more cash-rich buyers opting to go hostile, as natural gas producers have become reluctant sellers in the wake of the recent slump in gas prices.

“The abundant number of oil and natural gas companies and properties for sale in the last few years would have deterred companies from pursuing a hostile takeover,” Mr. Pavic said in a report last week. With the price of natural gas down 50 per cent this year, he wrote: “There has been a dearth of product available publicly so far in 2006, possibly sparking the return of the hostile bid.”

Canada Southern, a $141-million company with gas properties in the Arctic, has turned down an offer from Petro-Canada. Signal, with a $106-million capitalization, has just said no to a cash-and-share offer from Pearl Exploration and Production Ltd. Both target companies have hired advisers and are attempting to drum up rival proposals, or win better bids from their declared suitors.

The Globe and Mail