Orlen Buys Oil and Gas Assets in Canada, Poland for $392 Million

  • Polish refiner will get first gas output in its home country
  • Dividend policy and financial ratios are unaffected by buys

PKN Orlen SA, Poland’s biggest oil company, is expanding its Canadian and Polish operations through two $392 million acquisitions, taking advantage of plunging crude prices.

State-controlled Orlen said on Tuesday it will buy Kicking Horse Energy Inc. in a C$356 million ($273 million) transaction to increase its Canada production by more than 4,000 barrels of oil equivalent, or about 60 percent. The refiner also agreed to purchase Salt Lake City-based FX Energy Inc. in a $119 million deal, including debt. FX Energy, which focuses its operations on Poland, will give Orlen its first domestic upstream production.

The company is sticking to its strategy of buying at least one production asset a year in a bid to diversify its revenue stream away from its refining and retail businesses. In 2013 and 2014 it bought Canada’s TriOil and Birchill for a total of $413 million. Orlen said on Tuesday the announced purchases, which will be financed from existing cash reserves and loans, won’t affect its dividend policy and financial fundamentals. The deals are “satisfying PKN Orlen’s appetite for inorganic growth in the near term,” according to its presentation for investors.

Other government-owned companies are also on the lookout for takeovers beyond Poland. PGNiG SA, the nation’s dominant gas company, said earlier this month it is in preliminary talks to buy production assets in North America, while second-biggest oil refiner Grupa Lotos SA may announce an acquisition in days, Dziennik Gazeta Prawna newspaper said on Monday.

Orlen has been drilling for both conventional and shale gas in Poland, but has yet to start production. FX Energy owns stakes in several production and exploration licenses in Poland and also has output in the U.S., according to Orlen’s statement. FX Energy’s natural gas production in Poland stands at about 350,000 cubic meters a day, or 2,135 boe with reserves amounting to 8.4 million boe. Orlen’s total reserves will rise 76 percent to 88 million boe after the deals are completed.

Crude oil prices declined amid a global growth slowdown and traded at an average of $50.85 a barrel so far this year, compared with an average of $92.93 last year. Shares in Orlen dropped 3 percent to 62.61 zloty as of 11:11 a.m. in Warsaw, curbing this year’s advance to 28 percent and valuing it at $7.2 billion.

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