M&A

5 November, 2009

UPDATE 1-West Energy to buy properties in Alberta for C$147 mln

* Says to buy properties in Cardium play from a major co

* Says deal to add significant drilling inventory

* Sees daily production at 5,000 boe after deal close

* Shares up as much as 12 pct (Adds details, analysts comments; updates stock movement)

By Koustav Samanta

BANGALORE, Nov 5 (Reuters) - Canadian crude oil and natural gas company West Energy Ltd (WTL.TO) said it agreed to buy some oil properties in the Warburg area of Alberta for C$147 million ($138.4 million) from an unnamed "major company," sending its shares up as much as 12 percent."

The acquisition leverages the company into a long reserve life and high netback light oil reserve base with significant development upside, West Energy said, adding that the deal will double its Cardium horizontal oil well drilling inventory to 80 locations.

Raymond James analyst Luc Mageau said the acquisition is certainly positive for the company and going forward it should help them establish production growth.

"The acquisition will give the company more market visibility given the fact that it got some acres along the emerging Cardium light oil play and also some diversification away from its current assets," FirstEnergy Capital analyst Cody Kwong said by phone.

Energy explorers have been looking at opportunities in the Cardium oil resource play in west central Alberta as use of newer techniques like multi-stage fracing are allowing the companies to better access the rocky reservoirs.

The company said it expects its 2010 capital budget to exceed C$60 million, while its major capital focus will include drilling 24 Cardium horizontal wells.

The Warburg assets are also close to the company's core assets at Crossfire and West Energy will realize benefits combining the field operations and developing the properties, it added.

The properties being purchased include 7 million barrels of oil equivalent (boe) of proven plus probable reserves which are producing 1,450 boe per day of predominately light oil.

West Energy sees corporate daily production to be at 5,000 boe, with a current corporate netback of about C$30 per boe, after closing the acquisition by Dec. 15.

"In the near term I think I can see my volume estimates going up. I will be less nervous about West hitting my targets because of the predictable nature of the assets," FirstEnergy's Kwong said. West Energy said the transaction will help it continue to be a light oil focused company with a larger and more diversified drilling portfolio which can be exploited using its existing cash flow.

Shares of the company were up 7 percent or 16 Canadian cents at C$2.47 Thursday afternoon on the Toronto Stock Exchange. They touched a high of C$2.58 earlier in the day.

($1=1.062 Canadian Dollar) (Reporting by Koustav Samanta in Bangalore; Editing by Gopakumar Warrier and Pradeep Kurup)

Source: http://www.reuters.com