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Strathcona Rerources’ Tucker thermal oil operation near Cold Lake, Alta. The company will acquire Greenfire as majority shareholder Waterous Energy Fund consolidates its holdings.Supplied
Strathcona Resources Ltd. SCR-T is buying fellow heavy-oil producer Greenfire Resources Ltd. GFR-T for about $2.4-billion in cash and stock, a deal aimed at consolidating holdings controlled by Calgary-based Waterous Energy Fund.
The friendly transaction, the latest in a recent gusher of oil-patch takeover activity, will bring together two oil sands and heavy-crude-oil producers with similar strategies, and the larger scale is expected to improve access to capital, Strathcona said on Sunday.
Strathcona is offering either 0.25 of one of its shares or $11 in cash for each Greenfire share, the companies said. The first option yields a premium of 15 per cent over Greenfire’s Friday closing price on the Toronto Stock Exchange. The latter affords a lift of 39 per cent.
Waterous Energy Fund, led by financier and former investment banker Adam Waterous, owns 57 per cent of Strathcona and 72 per cent of Greenfire. The fund is backing the deal and has elected to take Strathcona stock for its Greenfire holdings.
Strathcona will assume $550-million in Greenfire debt, lifting the deal’s price tag to as much as $2.9-billion.
Greenfire shares surged 38 per cent to a 52-week high of $10.94 on the TSX on Monday. Strathcona slipped 5 cents to $36.29.
By combining the two companies, Strathcona said it expects annual cost savings of $75-million a year and tax savings of as much as $400-million over four years.
The combined entity will have more than 3 billion barrels of proved-plus-probable reserves, representing a reserve life index of more than 54 years, Strathcona said.
“Overall, the transaction makes strategic sense and supports our view that this wave of consolidation will continue, driven by scarcity,” Travis Wood, analyst at National Bank Financial, said in a note to clients.
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Waterous Energy Fund is led by financier and former investment banker Adam Waterous, pictured in Calgary last year.Todd Korol/Reuters
Takeover action has heated up with oil prices, which surged more than 40 per cent after the United States and Israel launched their attacks on Iran in late February. Iran retaliated by taking control of the Strait of Hormuz, one of the world’s main shipping corridors, and bringing tanker traffic to a virtual halt.
That has put Canada’s significant oil and gas resources in the global spotlight, and Prime Minister Mark Carney has prioritized bolstering exports.
Access to global markets for both oil and natural gas has already increased with the expansion of the Trans Mountain pipeline to the West Coast and construction of new liquefied natural gas plants. Another million barrels a day of new oil export capacity could be built in the coming years if the Pacific Link pipeline is constructed, and the Shell PLC-led LNG Canada project has announced it is doubling its production capacity.
Among other recent energy deals: Shell acquired ARC Resources for US$16.4-billion, Cenovus Energy Inc. bought Athabasca Oil Corp. for $5.7-billion and, in late October, Ovintiv Inc. said it would acquire Logan Energy Corp. for US$890-million including assumed debt.