The Canadian oil landscape looks encouraging for 2021 as Whitecap Resources Inc. acquires two oil and gas companies in addition to mergers between other energy companies, with growth expected in the coming year as energy demand increases regularly.
In November, Whitecap Resources announced its intention to acquire rival TORC Oil & Gas in an all-share deal equivalent to $ 704.12 million. The deal is expected to close on February 25, 2021, offering encouraging prospects for the first quarter of next year.
This merger would mean production estimated at 100,000 bpd, making it one of the main players in Canada. The expected value of the combined company is approximately $ 3.13 billion.
As demand for energy has steadily increased since the crisis of early 2020, Whitecap’s share price has risen steadily from CAN $ 2.29 ($ 1.80) in early July to CAN $ 4.96 ($ 3.89) in December, with a market cap of CAN $ 2.025 billion ($ 1.58 billion)) on the Toronto Stock Exchange.
Whitecap CEO Grant Fagerheim said of the acquisition: “We are combining two powerful Canadian energy producers to form a leading light, large-cap oil company aimed at generating long-term sustainable returns for shareholders while giving priority to responsible Canadian energy development ”.
The TORC acquisition comes just months after Whitecap announced its plan to buy NAL Resources for nearly $ 119 million in August. Manulife, an insurance and financial company, will hold a 12.5% interest in the combined company as Whitecap will issue 58.3 million shares. The decision to acquire the two companies further advances Whitecap’s goal of growing its assets and operations in Alberta and Saskatchewan.
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Canada’s smaller energy companies have shown interest in mergers throughout 2020 as a way to strengthen their portfolios, in response to volatility in the oil market this year.
In October, Cenovus Energy and Husky Energy agreed to an all-equity transaction valued at $ 2.9 billion for a merger. The move will make the combined company the third largest oil and natural gas producer as well as the second largest refiner and upgrader in the country, with a total value of $ 17.97 billion and an equivalent production level of 750,000 bpd. The company is expected to operate out of Calgary, Alberta.
In addition, Obsidian Energy has proposed a combination transaction to Bonterra Energy Corp. in August, with a plan to issue up to 72.3 million shares, giving Bonterra a 48% stake in the merged company. Bonterra has yet to accept the proposal, but that could all change as the deal will be on the table until January 4, 2021.
In July, America’s largest independent oil producer, ConocoPhillips, announced it would purchase Canadian land from Kelt Exploration Ltd for $ 375 million. Kelt’s 140,000 acres in British Columbia lie right next to ConocoPhillip’s Montney lands, offering a larger oil production potential estimated at 1 billion bpd.
ConocoPhillips previously sold a large portion of its Canadian assets to Cenovus Energy in 2017, with the goal of pulling foreign producers out of Canada. However, given the dire situation – the fight against pandemic restrictions and the significant drop in oil prices, small businesses are turning to outside players for a rescue.
Mergers between smaller Canadian oil and gas companies and larger Canadian and US players through equity trading have helped them tackle declining energy demand in 2020. Beginning in 2021, these companies newly merged companies are expected to play an important role in the Canadian petroleum sector.
By Felicity Bradstock for OilUSD
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