Dana Petroleum to purchase Petro Canada Netherlands for $393MM

Source: Dana Petroleum

Dana Petroleum has entered into an agreement to acquire the entire issued share capital of Petro Canada Netherlands BV from Petro Canada (International) Holdings B.V, a wholly owned subsidiary of Suncor Energy Inc. for an estimated net cash consideration of approximately €328 million1 (approximately £270 million or US$393 million).

Petro Canada Netherlands is an upstream oil and gas exploration and production company operating in the Dutch sector of the North Sea.

The Acquisition is a Class 1 transaction for Dana under the Listing Rules and is therefore conditional on the approval of Dana shareholders.

In connection with the Acquisition, and as part of a broader corporate refinancing initiative, the Company has agreed terms with the Royal Bank of Canada for the provision of a US$900 million term loan and revolving credit facility to be fully underwritten by RBC.

Key Acquisition highlights

The Acquisition represents the Company's largest acquisition to date, and the Dana Board believes that the Acquisition provides significant operational and financial benefits, including providing Dana with a significant growth step in a third core area in Europe and a complementary asset base in the North Sea.
Also, the acquisition will provide Dana with an additional 31 million barrels of oil equivalent ("mmboe") of proved and probable ("2P") reserves and 51 mmboe of proved, probable and possible ("3P") reserves at 31 December 2009, and unrisked prospective resources of up to a further 67 mmboe across the Petro Canada Netherlands portfolio (20 mmboe on a risked basis). Petro Canada Netherlands' net production this year, to end April 2010, averaged 12,136 boepd with the annual maintenance shut-downs on the De Ruyter and Hanze fields yet to occur
The acquisition will also increase Dana's previous 2010 production guidance by some 10-12% on an annualised basis, subject to timing of deal completion. Dana estimates that its production will increase by 8,000-9,000 boepd in 2011, equivalent to a 20-25% increase in previous guidance for the Dana Group, with a production increase of 10,000-14,000 boepd in 2012 as new projects are brought onstream in The Netherlands
By buying Petro Canada Netherlands, Dana's total number of producing fields will increase to 54 from 36 currently, (this includes 15 new offshore fields and 3 new onshore fields).
This transaction has a purchase price equivalent to approximately US$ 12.16 per barrel of 2P reserves, based on the Adjusted Consideration (discussed further below) and excluding the Alkmaar (PGI) project which has no underlying reserve component.

Petro Canada Netherlands has interests in a number of currently producing fields, namely the De Ruyter (54.07%) and Hanze (45%) oil fields which are both operated by Petro Canada Netherlands, the Petro Canada Netherlands operated Hanze gas field (27%) and a number of non-operated gas interests in the L05b&c (30%) and L08b area (25-30%) operated by Wintershall, and the P15 area (9-11%) and P18 area (0.7-4%) operated by the Abu Dhabi National Energy Company ("TAQA"). In addition, Petro Canada Netherlands has a 12% equity interest in the Alkmaar ("PGI") gas storage project operated by TAQA. Gas production in the Netherlands has the added benefit of a strong oil price linkage in the commercial gas sales agreements.

The Dana Board believes that there is the opportunity to create significant additional value for Dana shareholders from the existing Petro Canada Netherlands portfolio. The Dana Board anticipates that this would be achieved via developments in the core areas and exploration centred around existing infrastructure hubs. Medway in the De Ruyter Area offers near term production through an integrated oil and gas development with start up planned for 2012. The recent L06-B HPHT gas discovery should provide further reserves growth in the L05, L06, L08 areas, whilst the L06-LS5 exploration prospect, which is currently being drilled, should also provide further upside potential.



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