Mid-sized oil firm Baytex Energy Ltd launched a C$135-million ($87-million) takeover of Triumph Energy Corp yesterday to reduce its dependence on tar-like heavy oil.

It is its second friendly bid for a smaller rival in as many weeks. Baytex, whose production mix is now dominated by heavy crude, said it was offering C$3.70 in cash, or 0.2846 of a share, for each Triumph share. The offer is subject to limits of C$73 million in cash and 4.8 million Baytex shares.

The suitor would also assume light oil and natural gas producer Triumph's debt of about C$24.5 million, bringing the total price to C$159 million in the latest in a deluge of takeover deals in the Canadian oil industry.

On March 30, Baytex offered C$65 million in cash for another Canadian rival, OGY Petroleums Ltd. The company sold about $150 million of high-yield debt in the United States in February to finance takeovers. Baytex had been hurt in the stock market late last year by its exposure to heavy crude, which was discounted to light oil at record levels due to a glut of supply.

"It sort of exposed our vulnerability in terms of being too dependent on any single product," said Ray Chan, Baytex's chief financial officer. "But don't get me wrong, we're still very proud of our heavy oil assets because they have a low cost structure and we're still making money, even at the worst of times."

Heavy crude, Canada's fastest growing grade, is typically discounted because it requires more extensive refining. Triumph is expected to produce about 1,600 barrels of light oil, 750 barrels of gas liquids and 16.5 million cubic feet of gas a day in May, Baytex said. the properties are located near Baytex operations in west-central and southeast Alberta.

Proven reserves are pegged at six million barrels of oil and natural gas liquids and 48 billion cubic feet of natural gas. "Baytex is about three-quarters heavy oil right now and really suffered for it in the fourth quarter of last year and probably into the first quarter of this year, just because of the widening of differentials (between light and heavy oil)," said Gord Currie, analyst with Canaccord Capital Corp.

The stock went from a high of C$16.25 in September 2000 to a low of C$9.10 in late December. By yesterday, it had recovered to C$13.30 in Toronto, up 20 Canadian cents. Triumph jumped 64 Canadian cents, or 21 per cent, to a new high of C$3.64 after Baytex announced the bid.

Baytex said the takeover was conditional on at least two-thirds of Triumph shares being tendered. Triumph executives agreed to tender to the bid and and the company also said it
will pay Baytex a break fee of C$6 million if the deal falls through.