When Conoco Inc. of Houston, Texas, announced the CDN$7 billion acquisition of Gulf Canada Resources Limited of Calgary, Alberta, a large segment of the press release was devoted to outlining all of the expected benefits to be received from the assets acquired. The acquisition price represented a 35% premium over Gulf's closing share price on the announcement date. Included in the assets of Gulf were the following:
• Proven reserves of over 1 billion barrels of oil
• Probable reserves of approximately 1.2 billion barrels of oil
• Proven reserves of 1.4 trillion cubic feet of natural gas
• Probable reserves of 2.9 trillion cubic feet of natural gas
• Four million acres of undeveloped land in western Canada
• A 72% interest in Gulf Indonesia Resources Limited; included in this com pany's assets were reserves of 180 million barrels of oil and 1.5 trillion cubic feet of gas
• A 9% interest in joint venture, Syncrude Canada Ltd., which is developing the heavy oil tar sands in northern Alberta
• Long-term contracts to deliver 3 trillion cubic feet of natural gas to Southeast Asia
• Recent exploration successes in Sumatra and offshore Java
Many of the assets acquired in this business combination present particular valu ation challenges. Provide guidance to the financial staff of Conoco as to how the price should be allocated among various tangible and intangible assets (including goodwill) and how liabilities included in the portfolio of Gulf Canada Resources Limited should be measured. Explain your answer in terms of the provisions of IFRSs.

  • CreatedJune 08, 2015
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