July 8, 2009 / 1:39 PM / 9 years ago

UPDATE 2-Baytex to buy assets from True Energy for C$93 mln

* New assets to add about 3,000 boe/d in 2009

* Sees C$25 mln annual net oper income from new assets

* Says acquisition to add 6 pct to cash flow/unit (Adds details, analyst comment)

By Ashutosh Joshi

July 8 (Reuters) - Canada’s Baytex Energy Trust BTE_u.TO said it agreed to acquire heavy oil and natural gas assets, mainly located in southwest Saskatchewan, from True Energy Trust TUI_u.TO for a total of C$93 million ($79.90 million).

The oil and gas income trust expects the new assets to add about 3,000 barrels of oil equivalent per day (boe/d), taking its total production to about 43,000 barrels for 2009.

In a separate statement, True Energy said that it was selling majority of its oil and natural gas assets in Saskatchewan to reduce its bank debt.

“Baytex is increasing their exposure to heavy oil production going forward. Right now heavy (oil) differentials are very narrow...the multiples they are paying are fairly attractive if we assume differentials are going to stay anywhere near they are,” CIBC analyst Brad Borggard said by phone.

The analyst has a “sector performer” rating on the stock.

Baytex said the acquisition is expected to add about 6 percent to cash flow per trust unit and sees capital spending of about C$10 million on these assets in the second half of 2009.

The trust said the heavy oil assets are located in the Kerrobert and Coleville areas of southwest Saskatchewan, while the natural gas assets are located in the Ferrier area of west central Alberta.

“The acquisition provides significant future development potential in the greater Lloydminster area where we already possess significant leasehold and operating infrastructure,” the company said in a statement.

Baytex expects annual net operating income of C$25 million from these properties, based on current commodity prices.

The acquisition, which Baytex expects to close by end of the month, was being funded by drawing on its revolving credit facility, the trust said.

Units of Baytex were down 47 Canadian cents at C$18.15, while those of True Energy were down 5 Canadian cents at 75 Canadian cents, in Wednesday afternoon trade on the Toronto Stock Exchange. ($1=1.164 Canadian dollar) (Editing by Anil D’Silva, Pradeep Kurup)

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