NAL Oil & Gas Trust to Buy Breaker for C$310 Million

By Jim Polson

Oct. 13 (Bloomberg) -- NAL Oil & Gas Trust agreed to buy Breaker Energy Ltd., a producer of oil in Alberta and natural gas in British Columbia, for about C$310 million ($301.6 million) in stock to lift output and help with conversion to a corporation.

Owners of Breaker will get 0.475 trust unit per share, worth C$5.96 at the Oct. 9 closing price, the Calgary-based companies said today in a statement. That’s a premium of 4.6 percent to Breaker’s last closing price. The trust said it will assume C$93 million of debt and acquire tax pools of C$270 million that it can use to shelter profit.

Canadian income trusts are consolidating after the federal government announced plans two years ago to start taxing them in 2011. NAL intends to convert to a corporation that year. The Breaker purchase, expected by the trust to close by Dec. 10, is NAL’s third this year, following the acquisition of Spearpoint Energy Corp. for $15.1 million in August and Alberta Clipper Energy Inc. for $72.3 million in June.

“Our game plan has been to add quality assets with upside opportunity through internal investment and acquisitions,” NAL Chief Executive Officer Andrew Wiswell said in the statement.

Daily production for Breaker this year will average the equivalent of 6,700 barrels of oil, according to the statement. The purchase will increase NAL’s proved and probable reserves 32 percent, to the equivalent of 96 million barrels. Net undeveloped acreage will rise by 140,000, or 34 percent.

Breaker’s proved reserves are equivalent to 12 million barrels of oil. Another 11 million barrels are booked as probable, the companies said.

Irricana, Fireweed

The NAL purchase brings production at the Irricana oil field in central Alberta ands the Fireweed natural-gas field in British Columbia.

BMO Capital Markets advised NAL on the purchase. FirstEnergy Capital Corp. advised Breaker.

Canadian income trusts are unincorporated funds that hold assets and distribute cash flow to unit holders, avoiding most income taxes. Trusts are converting to corporate status because their tax exemption expires in 2011.

NAL fell 9 cents to C$12.45 in Toronto. Breaker Energy gained 5 cents to C$5.75. The Toronto Stock Exchange was closed yesterday for the Thanksgiving holiday.