Is Novus Energy just the start?
Plus: Trinidad Drilling partners up with Halliburton in order to grow its international business
When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at email@example.com
by Max Fawcett
If the Calgary Herald’s Dan Healing is right, the recent takeover of Novus Energy (CVE:NVS) may only be the beginning. The $320 million purchase, he writes, “is the first step in a plan by a Chinese state-owned oil giant to build a major Canadian presence.” That company is Yanchang Petroleum International, and it paid a 40 per cent premium to acquire Novus. Current Novus CEO Hugh Ross says that management will stay on, and be empowered to be bolder than it has in the past. “We’re going to be quite an acquisitor,” he told Healing. “We’re going to grow fairly aggressively through our drilling programs and through aggressive acquisitions.”
The deal falls just a few million dollars short of the $344 million threshold that triggers a review by Investment Canada, but it’s not quite done just yet. In addition to the support of at least two-thirds of Novus’s existing shareholders, the deal requires regulatory approval in both China and Canada and some additional financing. Yanchang will pay Novus $5 million if it doesn’t receive the required approvals from Chinese officials, while Novus has agreed to pay Yanchang $10 million if it goes with a different bidder.
Trinidad Drilling (TSE:TDG) also found itself a foreign partner, but it’s taking a bit of a different approach. The drilling company announced earlier this week that it has entered into a joint venture with Halliburton that will give it the right of first look on all of the projects that Halliburton manages outside of Canada and the United States. The first such project will be in Saudi Arabia, where Trinidad will provide four rigs to start.
It’s an impressive deal (Trinidad is actually the majority partner, with a 60/40 split) and FirstEnergy thinks it will be accretive to the company’s bottom line – and supportive for its share price. “We believe this deal will be beneficial for Trinidad as it reaches out beyond Canada and the U.S.,” analyst Kevin Lo wrote. “While we are concerned that historically many Canada service companies have not done well internationally, Trinidad’s affiliation with Halliburton should prove profitable, as we have seen with the partnership between Schlumberger (not covered) and Saxon (private). We also surmise that given Halliburton’s reach worldwide, there are many opportunities that could be profitable for Trinidad. In the near term, HAL is bidding on additional work in Mexico, which could help Trinidad’s existing rig fleet if the terms were favourable.” FirstEnergy maintained its outperform rating on Trinidad shares, and bumped its target price up to $11.50
And WestJet (TSE:WJA) posted yet another month of increased passenger traffic today, noting that its figures for August were up 11.5 per cent on a year-over-year basis. Its load factor actually decreased slightly on the month, but that’s because it increased its capacity with the launch of WestJet Encore. The stock responded favourably to the news, rising almost three per cent at midday.