KNOC to acquire Canadian Harvest Energy Trust

Korea National Oil Corp. (KNOC), the state-owned oil and gas company of South Korea, said it would buy Harvest Energy Trust in a deal worth 4.1 bn Canadian dollars, or $ 3.9 bn. The transaction represents a major coup for Seoul as it seeks a steady supply of oil from overseas.
Harvest, an oil producer and refiner based in Calgary, said that KNOC would pay about $ 1.8 bn in cash and assume $ 2.3 bn in debt to acquire its reserves in western Canada and its refining operations on the country's eastern seaboard.

The deal, subject to shareholder and regulatory approval in Canada, is expected to close in December, and is the first of two such acquisitions that KNOC has said it was looking to make this year.
EuGene Synn, vice president of new ventures at KNOC, said that he was confident the deal would be approved by the Canadian authorities, and that he did not expect a rival bid to emerge for Harvest, which has agreed not to solicit competing offers. KNOC agreed to pay $ 10 per trust unit, a premium of 37 % over their closing price in Toronto. Trust units are traded on stock exchanges like shares, but represent parts of income trusts, a type of company that holds revenue-generating assets. Such companies are common in Canada.

South Korea, the third-largest Asian economy after Japan and China, produces little oil of its own and is a top importer. Like China's state-owned oil companies, KNOC is pursuing acquisitions overseas to meet the country's consumption, which exceeds 2 mm bpd according to a CIA estimate for 2008.
Mr Synn said "we plan to grow by three or four times by 2012," with the company seeking 2 bn barrels in reserves, and daily production of 300,000 barrels. KNOC already owns assets in Canada. In 2006, it bought a lease on oil sands from Newmont Mining for $ 270 mm, and now plans to combine the development of that operation with Harvest's, according to Mr Synn.

In a message to investors in September, Harvest estimated that it was producing between 50,000 and 51,000 bpd. Mr Synn said KNOC intended to make investments that would increase that production. The Canadian company reported reserves of 154 mm barrels of oil or its equivalents at the end of last year.
In the Harvest statement, Young-won Kang, president of KNOC, said the company "has ambitious plans for future growth and is committed to a long-term investment strategy in Canada." The South Korean company lost out in June when China's Sinopec bid $ 7.2 bn to acquire Addax Petroleum, an oil company based in Geneva with assets in West Africa and Iraq.