Shell Canada offers to buy Duvernay Oil for $5.16B

Shell is offering 83 Canadian dollars per share ($82.59) for Alberta-based Duvernay Oil, which plans to triple its natural gas production of about 25,000 barrels of oil equivalent per day (boe/d) to about 70,000 boe/d by 2012.

"Duvernay could become a valuable part of the Shell portfolio, where we can add value through technology and scale," Jeroen van der Veer, chief executive of Shell, said in a release.

Based on Duverney's 62.5 million shares outstanding, according to Capital IQ, the transaction is valued at $5.16 billion. Including assumed debt, Royal Dutch Shell says the acquisition is worth 5.9 billion ($5.87 billion).

Royal Dutch Shell said Duvernay's board recommends the deal to shareholders, and directors and officers holding a combined 18.1 percent stake have agreed to vote in favor of the bid.

Duvernay has agreed to pay a fee of $119.4 million dollars in the event the deal doesn't go through.

Jason Gammel, an analyst with Macquarie Research Equities, said Shell is offering to pay "the price the market wanted."

"This is really just expanding on ... a fairly and consistent progressive strategy," he said in a phone interview.

The deal comes at a time when natural gas is getting increasing attention from those in and outside of the energy sector. Recently Texas oilman T. Boone Pickens called for using the U.S.'s abundant natural gas to replace some imported gasoline and diesel.

In the short term, the deal might not affect natural gas prices because the ability "to get in there and really start drilling takes some time," Gammel said.