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| Billions of dollars in oil and gas assets are for sale. Companies too. (Kyle Bakx/CBC) |
Pengrowth Energy sells for a nickel per share in proposed deal
It was a rough week for the Canadian oilpatch, to say the least, with the Keystone pipeline shutting down after a leak, Encana deciding to become American, and a new drilling forecast for 2020 that is woeful at best.
To cap things off, Pengrowth Energy announced its pending sale.
The Calgary-based company was a homegrown success story and was once worth billions of dollars. Its share price was more than $13 in 2011.
On Friday, Cona Resources said it would buy Pengrowth in a deal that would value each share as worth a nickel.
That’s even lower than the 20 cents they were worth earlier in the week.
Essentially, a piece of leftover Halloween candy is worth more than a share in Pengrowth.
Facing few options
The company spent much of this year trying to find a way to survive. Still, the proposed sale price is startling.
“It’s nice to see them get something done, but a little surprised the offer is considerably less than what the shares were trading [the day before],” said Tom Pavic with Sayer Energy Advisors, a Calgary-based mergers and acquisitions consulting firm.
“You don’t normally see public companies get sold at a discount to its trading price, but it’s just a sign of the times,” he said.
The times are quite gloomy in the oilpatch.
There are 50,000 fewer people working in oil and gas than there were five years ago, before the price crash, according to CIBC.
On Thursday, oil and gas producer Encana declared itself an American company in hopes of attracting more investment.
It’s not just Encana making an address change to the U.S. Many companies are moving drilling rigs, equipment, and crews south of the border. Investment has dried up in Canada, while money is still being spent in Texas and other southern states.
Oil and gas producers in Western Canada are left trying to cut costs as much as possible. For those carrying heavy debt, the weight is often too much to bear.
Pengrowth owed too much money. After oil prices crashed, the hole was too deep to emerge from.
Source: Kyle Bakx | CBC News
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