KNOC faces a tough exit in Canadian oil business

Pengrowth Energy and Canadian Natural Resources are likely buyers of Korea National Oil Corporation’s Canadian oil and natural gas properties as the state-run company retreats from the country it once made a cornerstone of its global expansion.

Buyers may be drawn to the lower prices the company will have to consider as it vies with a glut of properties for sale, said Kyle Preston, an analyst at National Bank of Canada.

KNOC, as the Korean company is known, said on Sept. 6 it was in initial talks with potential buyers of its Canadian division as it seeks to boost returns from its foreign businesses.

“KNOC is looking to sell into a very oversaturated market,” so the price is going to reflect that, said Chris Cox, an analyst at AltaCorp Capital in Calgary.

Pengrowth, which operates a small oil-sands operation using similar steam-based technology, might be interested in KNOC’s assets, Cox said.

Canadian Natural, known for buying land “on the cheap,” may want KNOC’s traditional oil and gas properties, he said.

The properties also may appeal to Husky Energy, which has operations in the oil sands, Preston said by phone the same day.

KNOC bought into Canada in 2006 when it acquired oil-sands holdings from Newmont Mining Corp. for $270 million.

It then paid $4 billion including debt in 2009 for Calgary-based Harvest Energy Trust. It was the Anyang, Korea-based company’s largest purchase.

KNOC paid C$525 million ($509.6 million) for additional Canadian assets from Hunt Oil Company in 2010.

Bloomberg