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— Shareholders of Petro-Canada and Suncor Energy Inc. voted Thursday to approve a combination of two of the country's largest oil and gas producers to become Canada's largest energy producer.
Petro-Canada shareholders voted about 96 percent in favor of the $19 billion Canadian-dollar deal ($17 billion) with Suncor. At a separate meeting, Suncor stockholders voted more than 98 percent for the deal.
The Suncor acquisition of Petro-Canada will forge a company with major oilsands operations and oil and gas interests in Canada, the United States and around the world.
"Together, Petro-Canada and Suncor will have a commanding presence as Canada's largest energy company and the fifth largest in North America," Petro-Canada Chief Executive Ron Brenneman told shareholders.
"The combined company will be large enough to compete in the top tier of global energy companies."
At the Suncor meeting, CEO Rick George told stockholders that Suncor will remain a formidable player in the oilsands after it takes on Petro Canada's assets. The difference, George said, is that the new company will be bigger, stronger, and able to compete with global supermajors.
The two Calgary-based companies announced their plans to combine in March, saying the transaction would create an energy heavyweight with a stock market value of C46 billion dollars ($41 billion).
Brenneman's nearly decade-long tenure as head of Petro-Canada would end some time in the third quarter of this year, when the deal is expected to close. He will serve as vice-chair of the new company.
Suncor CEO Rick George will remain at the helm of the combined company.
The new company would have a market capitalization of about $38 billion.
That's much smaller than global heavyweights such as Exxon Mobil and ConocoPhillips, which boast market capitalizations of $326.6 billion and $55.97 billion respectively, but the company would have some of the same benefits of scale.
The companies said they could save $244 million in operating costs and $812 million in capital efficiencies each year.
Petro-Canada and Suncor also must get approval from Canadian regulators to finalize the merger.
If the deal is unanimously approved, it would signal a new era for Canada's oil industry.
Alberta's once-booming oil sands sector has cooled as every major company has scrapped or delayed some expansion plans amid the plummeting of oil prices from their record high last summer.
Suncor and Petro-Canada both have put off projects to develop oil sands in Alberta because oil prices now are too low to make the projects viable. Production in Canada's oil sands is extremely expensive because of the energy and water required.
Companies plowed money into recovering the high-cost product when oil neared $150 per barrel, only to have prices tumble to five-year lows.
Analysts say oil prices need to be between $75 and $100 per barrel to make new oil sands projects economically viable. Crude prices hit a new high for the year near $70 a barrel Thursday, but have been much lower in recent months.
Petro-Canada's portfolio spans Canada and the globe, with assets in the oil sands, offshore on Canada's East Coast, Libya, the North Sea and elsewhere. By contrast, Suncor, is the oldest and second-largest oil sands operator.
Petro-Canada shares shot up 5 percent to C47.25 dollars Thursday afternoon on the Toronto Stock Exchange. Suncor's rose 5.3 percent to C37.63.
Petro-Canada common shareholders would receive 1.28 common shares of the expanded company for each share of Petro-Canada, while Suncor shareholders will receive new shares on a one-for-one basis.
The share exchange represents a 25 percent premium for Petro-Canada shares, based on a 30-day weighted average of the share price.
Petro-Canada shareholders will hold 40 percent of the enlarged company and Suncor shareholders will hold 60 percent.
Industry officials estimate the oil sands in northern Alberta could yield as much as 175 billion barrels of oil, making Canada second only to Saudi Arabia in crude oil reserves.
