Duke Energy Corp. is selling its 19 percent stake in gas producer Canadian 88 Energy Corp. for C$72.2 million ($47.2 million), less than two weeks after Canadian 88 installed an oil patch veteran as its chief executive.
Duke said it was selling its nearly 26 million shares in the small gas producer to a group of Canadian underwriters for C$2.80 each. Duke bought the interest in March 2000 for about C$50 million, and immediately replaced Canadian 88's founder, maverick oil man Greg Noval, with one of its own executives as CEO. The company had been struggling with high debt and poor gas price hedges. Noval went on to lead Canadian Superior Energy, which one year later launched what proved to be an unsuccessful hostile takeover of Canadian 88. Last week, Canadian 88 appointed former Canadian Hunter Exploration boss Steve Savidant as its CEO, replacing former Duke executive Joseph Pritchett III. Burlington Resources Inc. bought Canadian Hunter for C$3.3 billion last year.
The underwriters in the sale of Duke's Canadian 88 interest, led by CIBC World Markets and TD Securities, will sell the stock in a secondary offering, Duke said. Duke spokeswoman Deborah Witmer said her company bought the interest to gain knowledge of the Canadian energy market, and never considered it to be a core holding. The Charlotte, North Carolina-based company made a far bigger splash north of the border this year by acquiring pipeline and utility firm Westcoast Energy for $8.5 billion. "We just simply determined that it wasn't strategic to our interest to remain in (Canadian 88)," Witmer said.
Shares in Canadian 88 closed off 10 Canadian cents at C$2.90 in Toronto on Monday. They had climbed as high as C$3.13 in the wake of Savidant's appointment. Canadian 88 has long generated ink befitting a much larger company. After Duke bought its interest and Noval left, it wrote down its gas reserves then put itself up for sale. It jettisoned a major property to Dallas-based Hunt Oil, but the only bid made public was Canadian Superior's unwanted advance. The two sides sued each other, but last summer called a truce.
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