Oct 28 (Reuters) - Privately held Cygnet Energy will

acquire Kiwetinohk Energy ( KWTEF ) in an all-cash deal valued at

C$1.4 billion ($998.29 million), including debt, the companies

said on Tuesday, creating a larger Montney and Duvernay

operator.

Montney and Duvernay, in Alberta, are among Canada's most

prolific shale oil and gas plays, driving much of the recent

production growth and investment in the western part of the

country.

Earlier this year, Cenovus Energy and Strathcona

Resources entered a takeover battle for MEG Energy

, as the companies eyed its coveted asset, Christina

Lake oil sands project, which is also located near Alberta.

Cygnet will pay C$24.75 per share, representing a premium of

10.4% to Kiwetinohk's last close according to Reuters

calculations.

The deal combines complementary assets in the Simonette and

Placid areas of Alberta, giving the merged company more than

44,000 barrels of oil equivalent per day of liquids-weighted

production.

The acquisition will establish Cygnet as a leading operator

of Duvernay and Montney assets, the company said.

Funding for the acquisition will be provided by investment

funds of existing Cygnet shareholder NGP Energy Capital

Management and global investment firm Carlyle, who will

join as a new investment partner in Cygnet.

The deal is excepted to close in late December, the

companies said.

($1 = 1.4024 Canadian dollars)