Daylight savings

10 October 2011 By John Foley Follow @johnsfoley

The Chinese energy group has offered a massive 120 pct premium for Canadian producer Daylight. Like similar Chinese deals, the $2.2 bln offer works because of strategic necessity, still-high commodity prices, cheap capital and a shareholder none too fussed about value creation.

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Sinopec, the Chinese state-owned oil major, agreed to buy Calgary-based Daylight Energy for C$2.2 billion ($2.1 billion), or C$10.08 a share, on Oct. 9. That represents a 120 percent premium to the Canadian oil and gas producer’s share price at the close of trading on Oct. 7, and a 44 percent premium to the 60-day weighted average share price.
Sinopec said it would convert some of Daylight’s outstanding debt securities, with a principal amount of around C$250 million, to shares. Daylight also had C$437 million of bank debt at the end of the second quarter, implying it has an enterprise value of C$2.8 billion.
Daylight explores and develops oil and natural gas, and is principally based in Alberta, Canada. In 2010 it had proven and probable reserves of 174 million barrels of oil equivalent (mboe), of which it directly owned 141 mboe. Daylight’s proven reserves are equivalent to 2 percent of Sinopec’s proven reserves at the end of 2010, according to Royal Bank of Scotland.

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