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Orlen Buys TriOil for $178 Million to Expand Oil Output

PKN Orlen SA, Poland’s largest refiner, agreed to buy Canadian oil and gas company TriOil Resources Ltd for C$183.7 million ($178 million) in cash, its first foreign expansion into crude production.

State-controlled Orlen seeks to buy all shares of the Calgary-based company at C$2.85 each in a deal that implies TriOil’s enterprise value -- or a sum of its equity and debt minus cash -- at C$240.1 million, the Plock, Poland-based company said in a regulatory statement today.

The purchase will give Orlen, which also runs refining and retail businesses in the Czech Republic and Lithuania, access to foreign oil deposits and make it less dependent on Russian supplies. The company is looking for oil and gas from shale deposits in Poland and plans to spend 15.1 billion zloty ($4.8 billion) on expansion by 2017, it said in a strategy last year.

“We will gain access to producing fields and diversify our asset portfolio geographically” after the transaction is completed, Orlen Chief Executive Officer Jacek Krawiec said in a statement on the company’s website. “It also offers an opportunity for the transfer of know-how from the mature and technologically advanced Canadian market.”

TriOil Slumps

Orlen shares climbed as much as 2.1 percent, the biggest intraday gain in almost a week, and closed 0.2 percent lower at 43 zloty in Warsaw, valuing the company at 18.4 billion zloty. TriOil slumped as much as 8.2 percent to C$2.81, the steepest intraday decline in seven months.

“This is an interesting acquisition that should allow Orlen to gain some experience in the upstream business,” Flawiusz Pawluk, analyst at UniCredit SpA in Warsaw, said by phone. “TriOil operations aren’t that small and investments are financed with its own revenue,” which means PKN “won’t need to spend additional money on expanding the company.”

Orlen expects the deal to be completed by November after TriOil owners approve it. The purchase is “good, interesting and promising,” Polish Treasury Minister Wlodzimierz Karpinski, in charge of state-controlled companies, said at a televised news conference in Siemianowice Slaskie, Poland today.

TriOil had 179 producing wells and its daily production was 4,100 barrels of oil equivalent in the second quarter, according to Orlen’s presentation on its website. First-half revenue doubled to C$42 million from a year ago.

TriOil won’t need debt or other external financing to expand, Orlen Chief Financial Officer Slawomir Jedrzejczyk said at a news conference in Warsaw. Orlen plans no more takeovers this year and may analyze new acquisitions in 2014, he said.

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