(Reuters) - Pengrowth Energy Corp (PGF.TO) agreed to be bought by privately held oil producer Cona Resources as it struggles to raise capital in an industry hit by volatility in Canadian oil prices.
The offer of 5 Canadian cents per share for Pengrowth is at a 75% discount to the company’s Thursday close and values the deal C$740 million ($562.18 million) including debt.
Despite the discount, the deal is the most attractive alternative as there is no access to capital for the company or others in the Canadian oil and gas industry in general, Chief Executive Officer Pete Sametz said in a statement.
Pipeline congestion and higher production in the country had pushed down oil prices, which led to Alberta forcing mandatory production cuts this year, and chased away foreign companies and investors.
Subsequently, the differentials between Canadian oil and U.S. crude narrowed, but regulatory and environmental issues have delayed new pipeline capacity coming online.
The company, which has total long-term debt stood of about C$700 million as of June 30, launched a strategic review in March to strengthen its balance sheet.
Reporting by Arundhati Sarkar in Bengaluru; Editing by Anil D'Silva