The offer — $20.45 a share — is 77 per cent above the $11.55 closing price of Progress shares Wednesday on the TSX. The shares soared Thursday, jumping $8.50 to close at $20.05.
The two companies are already partners in an ambitious project to export liquefied natural gas (LNG) by ship from British Columbia. They set up a joint venture last year to develop Progress' Montney shale assets in the foothills of northeast B.C.
The companies have also announced that they've selected Prince Rupert, B.C., for the location of a proposed LNG terminal.
The board of Progress is unanimously recommending that shareholders accept the Petronas offer.
"Our relationship with Petronas has been very productive and they have clearly demonstrated a commitment to the local communities, both economically and environmentally," Progress Energy CEO Michael Culbert said, referring to a commitment by Petronas to retain the entire Progress workforce.
Culbert says Petronas has the financial resources needed to allow Progress to access the international LNG market.
"Petronas offers the size and scale that will enable our company to continue to grow and not be limited by the same cash flow challenges faced by many producers in the North American natural gas market today," he said in a statement.
The deal will require government approval under the Investment Canada Act and Competition Act.
Gas prices higher in Asia
Natural gas prices in many Asian markets are much higher than the sub-$3 per million BTU level seen in North America, which explains why several companies are actively exploring the LNG export option for their gas.
In May, Royal Dutch Shell gave a tentative go-ahead for a liquefied natural gas project in Kitimat, B.C., alongside three Asian Partners. The Anglo-Dutch energy giant says it will have a 40-per-cent stake in the project, called LNG Canada. PetroChina, Mitsubishi Corp. and Korea Gas Corp. will each hold a 20-per-cent interest.
Encana Corp. and two U.S. partners plan to start up their Kitimat LNG plant in 2015.
BC LNG, owned by the Haisla First Nation and Houston-based LNG Partners, expects to ship its first LNG in 2014 and Talisman Energy, Nexen and Imperial Oil are exploring their LNG options.