Canadian Press: Europe’s Royal Dutch Shell acquires another 97M shares of Shell Canada

Published: Saturday, March 17, 2007 | 5:41 PM ET

CALGARY (CP) – European oil giant Royal Dutch Shell PLC has acquired another 97 million shares of its Shell Canada Ltd. (TSX:SHC) subsidiary and is on the road to taking its Canadian unit private under an C$8.7 billion bid announced in January.

Royal Dutch, which already holds 78 per cent of Shell Canada, announced early Saturday that just under 97 million shares were tendered to its C$45 a share offer. That amounted to about 53 per cent of Shell Canada’s minority stake, meeting a key condition of the privatization bid.

The parent company had made the going-private offer contingent on attracting more than half of the 22 per cent of Shell Canada it did not own. Achieving that goal wasn’t a sure thing since some large shareholders had called the offer too low and said they would reject it.

Royal Dutch’s offer expired at 8 p.m ET Friday night, but the company extended the bid until the same time March 30 for stockholders who have not sold their shares.

With the additional stock in hand, Shell Canada appears in a position to acquire the rest of the company, though some legal hurdles may remain.

“This is a positive outcome, and a further step towards building on our strong position in Canada, using the strengths that only a company of our global scale can bring,” Royal Dutch Shell CEO Jeroen van der Veer said in a news release early Saturday from the company’s European headquarters.

“This is an opportunity to create an integrated unconventional oil business on an international scale.”

Royal Dutch, which has been desperately seeking to secure new sources of oil since it was forced to cut proved reserves repeatedly in a 2004 accounting scandal, announced in October a $40 a share bid worth about $7.7-billion for the part of Shell Canada it didn’t own.

However, that bid was rejected by the Canadian unit’s board and the two companies negotiated a sweeter bid of $45 a share announced in January and backed by the Shell Canada board.

At the time, dissident minority shareholders warned they might go to court to force a higher offer.

Shell Canada, set up 96 years ago as a gasoline retailer in Montreal, is now a major natural gas producer and oilsands operator and runs a national network of Shell branded gasoline stations.

The company, which left the conventional oil business in Canada years ago, has also been one of the pioneers in Canada’s offshore energy exploration and helped develop the Sable Island natural gas project off the coast of Nova Scotia.

However, its future lies in the Northern Alberta oilsands, where the Calgary company operates and owns 60 per cent of the Athabasca oilsands development. That project began operations in 2003 and is designed to produce 155,000 barrels of tar-like bitumen a day.

The company, and its Athabasca partners, Western Oil Sands and Chevron Canada, are spending an estimated $12.8 billion to boost production by another 100,000 barrels on the way to ultimately generating 700,000 barrels a day from the oilsands.

Royal Dutch’s news release Saturday, in which van der Veer referred to “an integrated unconventional oil business on an international scale” suggests the company may eventually seek to buy out its partners in the Athabasca project. Some speculate it may sell its Canadian natural gas business and could integrate Shell Canada’s current oilsands operations with other oilsands prospects controlled by the Shell group in other parts of northern Alberta.

Last year, Royal Dutch Shell, through its U.S. unit, spent $465 million to acquire energy rights for nearly 900 square kilometres of land about 100 kilometres west of Fort McMurray, the hub of the Canadian oilsands industry.

The land is largely undeveloped and the provincial energy regulator calls it a carbonate deposit, which means bitumen is essentially trapped in limestone rather than in the sand characteristic of most current viable oilsands mining projects.

The National Energy Board has estimated that of the 315 billion barrels of potential oil in the Alberta oilsands, about 38 billion barrels are within carbonate deposits, which have been considered uneconomic to develop.

Royal Dutch Shell is believed to be experimenting with new technologies such as underground combustion techniques to access these so-called carbonate deposits.

Shell Canada stock closed at $44.68 on the Toronto Stock Exchange on Friday, below the privatization bid. Its all-time high is about $47, reached in January, 2006.

© The Canadian Press, 2007

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