Philips Petroleum Co. yesterday announced the sale of its major Canadian affiliate to Petro Canada in a move that is expected to give Canada's national oil company an edge in northwest oil exploration.
Under the terms of the deal, Phillips has agreed to sell its 10.3 million shares of Pacific Petroleum stock (a 48.3 percent interest) to Petro Canada for $55.50 per share. The stock has been trading recently in the mid-$30 range. The total purchase price of the transaction amounts to $573 million.
According to the announcement, which came late yesterday following suspension of trading for the day of Philips' stock in the U.S. and Canada, the sale will be completed by May 15, 1979. It is also still subject to approval by Petro Canada's board.
Pacific Petroleum is itself a fully-integrated oil company with substanial reserves in the heart of some of the richest oil and gas lands in the provinces of Alberta and British Columbia. It has been a profitable property, last year showing earnings of $85 million on revenues of $450 million.
Phillips has held a controlling interest in the Canadian affilate for more than two decades. Most other shares of Pacific petroleum stock has been held by independents, 27 percent of them Canadian, according to a Phillips spokesman.
Though Pacific Petroleum accounted for Phillip's most significant Canadian oil holding, the company issued a statement stressing that the sale "does not represent a lack of interest in business opportunities in Canada."
"Phillips plans to continue actively pursuing its exploration and production activities in Canada through its wholly-owned Canadian subsidiaries, Phillips Petroleum Co. Western Hemisphere and Phillips Petroleum Canada Ltd.," the statement said.
Asked why Phillips was selling off what has been a profitable business for it, M. E. Kissell, the company's manager of investor relations said, "We have been looking at acquistions for some time. We have some areas where we think the money could be better spent." He did not indicate what new investments Phillips was considering.
He also said there was no connection between the sale at this time and the depressed third quarter earnings which Phillips recently accounced. The company's third quarter profits earnings were down 12 percent from the same period last year. This drop has been attributed to a foreign exchange loss due to the weakening of the dollar against the Norwegian Krone. Phillips has a sizeable investment in the North Sea off the Norwegian coast.
In recent months, the Canadian oil industry has been the scene of several other proposed stock deals - some successful, some not - as major companies have jockeyed for Canada's increasingly valuable reserves.
Earlier this year, Kaiser Resources purchased Ashland Refining. More recently, Petro Canada and Occidental Petroleum both tried unsuccessfully to purchase Husky Oil Co. holdings.
The sale of Pacific Petroleum had been a subject of speculation in the industry for several weeks prior to yesterday's announcement, at one point causing the company's stock to jump in price from the low-$30 range to high of $39.
News that the deal had finally gone through was greeted angrily by at least one Canadian competitor. "It's a misuse of funds," charged Ed Kemp, manager of Esso Resources Ltd., a subsidiary of Imperial Oil Ltd. in Calgary. "It won't do much for generating new energy supplies for Canada."
But Phillips was clearly happy with the deal. A spokesman for the company was unable to say how much the oil firm - the 12th largest in the U.S. - stands to gain on the sale, except to note, "My goodness, we'll have a healthy profit."