UPDATE 1-Baytex to buy Australia's Aurora Oil & Gas for $2.4 bln at big premium

Thu Feb 6, 2014 6:24pm EST

CALGARY, Alberta/SYDNEY Feb 7 (Reuters) - Baytex Energy Corp, a Canadian heavy oil producer, said it will buy Aurora Oil & Gas Ltd for C$2.6 billion ($2.4 billion), including debt, to add production from the prolific Eagle Ford shale oil region of Texas.

The acquisition is the largest in Baytex's 20-year history and broadens the company beyond its focus on conventional heavy oil from reserves in Western Canada and its emerging light oil output from the Bakken shale field in North Dakota.

Baytex said it will pay a total C$1.8 billion for the shares and assume C$744 million of Aurora's long-term debt.

Baytex is offering A$4.10 for each share of the Perth, Australia-based oil producer, a 52 percent premium to its average price in the past week, valuing the company at A$1.84 billion ($1.65 billion), Aurora said in a separate statement.

Aurora said its board had unanimously recommended the offer in the absence of a superior proposal. Its shareholders are expected to vote on the offer in April or May.

"The deal looks very good... very healthy premium, and obviously on a number of multiples, looks very attractive for Aurora shareholders," said James Bullen, analyst at Bank of America Merrill Lynch, in Sydney.

The acquisition, which will be funded in part with a C$1.3 billion share issue underwritten by Scotiabank and RBC Capital markets, will give Baytex access to Aurora's 22,200 acres of exploration lands and 166.6 million barrels of reserves in the Sugarkane field in south Texas, which Baytex says lies in the heart of the Eagle Ford region.

"Baytex will acquire premier acreage in the core of the Eagle Ford, one of the leading shale oil plays in the (United States)," James Bowzer, Baytex's chief executive, said in a statement.

Aurora produces 24,678 barrels of oil equivalent per day, less than half the 57,100 boepd Baytex produced last year.

"There is obviously quite a large disconnect between how the Australian market has been valuing these companies, and what the U.S. or North American corperates seem to be willing to pay," Bullen said, noting that Baytex could use Aurora's assets to fill gaps in its portfolio.

Baytex shares rose 47 Canadian cents to C$41.63 before being halted on the Toronto Stock Exchange late on Thursday. The deal was announced after markets closed.

Aurora shares closed at A$2.62 on Thursday.

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