ARC Energy to buy Storm Exploration

Canadian firm ARC Energy Trust has agreed to pay about C$680 million ($652 million) to buy Storm Exploration Inc, which has assets near ARC's Dawson field, identified as the lowest cost unconventional gas play in Canada.

Under the terms of the deal, each Storm shareholder can elect to receive either 0.5700 of an ARC unit or, 0.2021 of an exchangeable share of Arc Resources Ltd, the companies said in a joint statement. Storm shareholders will also receive 0.3333 common shares of ExploreCo, a new, separate junior exploration and production company with assets in the Horn River Basin and staffed with part of Storm's management team, and a cash amount of about C$1 a share from the proceeds of the sale of its Surmont asset.

ARC, a conventional oil and gas royalty trust in Canada, will issue about 28.4 million units, including the issuance of exchangeable shares, and assume C$90 million of total debt after receipt of option proceeds, including transaction costs.

Storm's board, being advised by FirstEnergy Capital Corp, has unanimously approved the deal and will recommend Storm shareholders to vote in favour of the transaction, expected to close on or before Aug. 17, the companies said. As a result of the proposed merger, ARC also raised its total production forecast for the full year to a range of 72,500 barrels of oil equivalent per day (boe/d) to 74,500 boe/d from its prior forecast of 70,500 boe/d to 72,500 boe/d. ARC Energy shares closed up 2 percent at C$20.89, while Storm shares were little changed at C$11.50 on Wednesday the Toronto Stock Exchange.