Call the Chinese to save Anderson Shareholders
An unnamed Chinese buyer has agreed to purchase private Calgary junior New Star Energy Ltd. for $215 million, including about $45 million in assumed debt, as a first step to growing a substantial western Canadian energy company. In a news release on Tuesday, New Star said shareholders would receive $1.25 in cash per share if the deal is approved. “The buyer is a Chinese company with very strong financial backing and they have a big plan to grow the business in Canada,” said New Star president and chief executive Steve Sugianto, refusing to identify the buyer. “So all I can say is, ‘Stay tuned.'” He said the management team had agreed to stay on with the new owners for at least the initial period, adding the company does not currently have a presence in Canada. Advertisement New Star was created in 2012 and raised about $128 million from a handful of investors in Calgary to buy and develop a land parcel 50 kilometres southwest of Edmonton that was producing about 1,400 barrels of oil equivalent per day. Sugianto, the former president and chief executive of publicly traded Galleon Energy Inc., became the first CEO. He said the company has used horizontal drilling and multi-stage hydraulic fracturing, along with a waterflood enhanced recovery program started last year, to boost production to a 2014 peak of about 4,000 boe/d (now at about 3,500 boe/d due to natural decline). The oil weighting, meanwhile, has improved to about 40 per cent from around 30 per cent. Sugianto said the company hasn’t raised any new equity in the past three years, so shareholders will be able to cash out with a decent return despite the current industry malaise due to low oil and gas prices. “The market conditions changed from June last year to today, oil prices dropped about 40 per cent,” he said. “Given the current conditions, I think this is the best option for all shareholders because it’s always good to make shareholders money.” New Star said the board has unanimously approved the sale and directors, officers and major shareholders of New Star representing about 55 per cent of the shares have agreed to sell. A special shareholders meeting is to be held in late June to vote on the deal. Sugianto said Calgary-based equity firm JOG Capital, one of the initial backers, remains a “substantial” investor in the company. New Star hired Macquarie Tristone to find a buyer last summer, with bids initially due in September. dhealing@calgaryherald.com Twitter.com/HealingSlowly