Canetic Resources Trust company history: the story so far

History

Canetic was formed in 2006 by merging two trusts, grew through a $930 million acquisition and a Titan takeover, then agreed in 2007 to merge into Penn West.

2006-2007: A merger and a big purchase

Canetic Resources Trust was formed on January 5, 2006, when Acclaim Energy Trust and StarPoint Energy Trust merged. It began trading on the NYSE on February 15, 2006. Its first combined quarter, reported in May 2006, showed cash flow of $194.7 million, production of 72,737 barrels of oil equivalent a day, a monthly distribution of $0.23 per unit and long-term debt of $838.1 million.

On August 2, 2006 Canetic agreed to buy gas-weighted assets at Hoadley in central Alberta and in northeast B.C. for $930 million, paying a $50 million deposit. The purchase closed on August 31, 2006 and added about 13,500 barrels a day. It was paid for with a $690 million bought deal, made up of 20,769,000 subscription receipts at $22.15 that became trust units, plus $230 million of 6.5% convertible debentures due December 31, 2011, and with credit facilities. Existing unitholders were diluted and debt rose. Canetic's own reserve estimate for the assets, 40.1 million barrels proved plus probable, was 25% below the independent figure of 53.2 million. The record is quiet between this deal and mid-2007.

2007-2008: Titan and the Penn West merger

On October 18, 2007 Canetic offered to buy Titan Exploration Ltd. for units, about $116 million including Titan's net debt, involving roughly 6.5 million new Canetic units. Titan would add about 1,800 barrels a day and land in the Lower Shaunavon area of southwest Saskatchewan, next to Canetic's existing acreage. By December 19 the offer was wholly unconditional, and by December 31 about 89.6% of Titan's Class A shares, on a fully diluted basis, had been tendered. Canetic's executives joined Titan's board, and the offer was extended to January 11, 2008.

Meanwhile, under an arrangement agreement dated October 30, 2007, Canetic agreed to merge into Penn West Energy Trust, with each Canetic unit exchanged for 0.515 of a Penn West unit. A unitholder vote was set for January 9, 2008. As of January 2, 2008, the vote, court approval and closing had not yet happened, and the Titan offer was still open.

Written from the 6 story beats below (2006 to 20 Dec 2007), which come from the company's own announcements and filings.

Beat by beat

The events that changed the company's story, in plain English, each written against everything known about the company at the time. The dot shows whether it was good, bad or neutral for shareholders.

2007

20 Dec
Continuing the October 2007 Titan offer: by December 19, 2007 about 85% of Titan A shares and 73% of Titan B shares had been tendered (about 84% of A shares on a fully diluted basis). Canetic's subsidiary will take them up, the offer is now wholly unconditional, and it was extended to December 31, 2007 for remaining holders. Titan's directors will resign and Charron, Evans, Broshko and Tiede will join Titan's board, so Canetic is gaining control of Titan, which is the Lower Shaunavon-area acquisition announced earlier. The release does not mention the pending Penn West arrangement.
business combination
6 Dec
Canetic filed the paperwork for a unitholder vote on January 9, 2008 on a plan of arrangement with Penn West Energy Trust (arrangement agreement dated October 30, 2007). Under it, each Canetic unit would be exchanged for 0.515 of a Penn West unit, so this is a merger into Penn West rather than a continuing standalone trust; the vote has not yet happened. Holders can elect a taxable exchange for Canadian tax by January 7, 2008, and are otherwise treated as choosing a tax-deferred exchange. Units must be deposited to receive Penn West units, and certificates not deposited by the sixth anniversary of the effective date lose that right. Record date is November 30, 2007.
business combination
18 Oct
On October 18, 2007 Canetic agreed to make an offer for Titan Exploration Ltd., paying 0.1917 of a Canetic unit per Titan Class A share and 0.6609 per Class B share, about $116 million including $17.5 million of Titan net debt and roughly 6.5 million new Canetic units. Titan's board supports the offer, and it needs at least 66 2/3% of shares tendered plus regulatory approvals; the deal would add about 1,800 boe/d and acreage in the Lower Shaunavon trend in southwest Saskatchewan next to Canetic's existing land.
business combination
24 July
This report confirms the Hoadley and B.C. acquisition closed on August 31, 2006 for about $930 million in cash, completing the deal announced in August. It was funded by a $690 million bought deal (20,769,000 subscription receipts at $22.15, which became trust units, plus $230 million of 6.5% convertible debentures due December 31, 2011) and credit facilities, so unitholders were diluted by the new units and debt rose. Canetic's own reserve estimate for the assets (40.1 million boe proved plus probable) is 25% below the independent AJM figure of 53.2 million boe.
business combination

2006

9 Aug
On August 2, 2006 Canetic agreed to buy the Hoadley (central Alberta) and northeast B.C. gas-weighted assets for $930 million, effective June 1, 2006, and had paid a $50 million deposit. Expected to close by end of August 2006, it would add about 13,500 boe/d of production, and management says it is expected to add to cash flow per unit and support the $0.23 monthly distribution (management's view, not a result). If Canetic defaults it would forfeit the deposit plus $43 million.
business combination
16 May
Canetic reported its first quarter of 2006 results, its first as a combined company after the January 5, 2006 merger of Acclaim Energy Trust and StarPoint Energy Trust. Cash flow was $194.7 million (up 141% from $80.8 million a year earlier, Acclaim only), production averaged 72,737 boe/d, the monthly distribution was $0.23 per unit, and the trust began trading on the NYSE on February 15, 2006. Long-term debt stood at $838.1 million.
business combination