ARC and 7G Energy to Merge in Mega Montney Deal
TSX-listed ARC Resources Ltd. and Seven Generations Ltd. (7G Energy) have entered into an agreement to combine in an all-stock merger that values the combined entity at approximately C$8.1 billion. The transaction has been unanimously approved by the boards of directors of both companies.
The combined company will become Canada’s sixth-largest upstream energy company, with approximately 1,160,000 net acres of Montney play assets located across British Columbia and Alberta. It will operate under the name ARC Resources Ltd. and will be headquartered in Calgary, Alberta.
Under the terms of the agreement, 7G Energy shareholders will receive a fixed exchange ratio of 1.108 shares of ARC common stock for each share of 7G Energy common stock owned. Upon completion, 7G Energy’s existing shareholders will own approximately 51% of the combined company, with ARC shareholders owning 49%. The Canada Pension Plan Investment Board (CPPIB) owns approximately 16.8% of the outstanding shares of 7G Energy, and has entered into a support agreement to vote in favor of the transaction.
The combined entity will be listed on the TSX, and will hold interests across Alberta and British Columbia. Pro forma proved plus probable (2P) reserves for the combined entity amount to approximately 2.5 billion barrels of oil equivalent (Bboe) as of December 31st, 2019, with a combined average daily production of approximately 340 thousand barrels of oil equivalent per day (Mboe/d) during Q3-2020, of which 57% was gas.
Calgary-based ARC currently holds interests in 625,920 net acres of Montney assets located in the Attachie, Red Creek, Tower, Septimus, Parkland, Sunset, Sunrise, Dawson, and Sundown areas of British Columbia, and the Pouce Coupe and Ante Creek areas of Alberta. Additionally, it also holds Cardium play assets in the Pembina area of Alberta.
7G Energy, also based in Calgary, is focused on the development of its liquids-rich Kakwa River project in Alberta, which covers approximately 500,000 net acres in the Montney play.
RBC Capital Markets is acting as financial advisor to ARC Resources on the transaction, while CIBC Capital Markets is advising 7G Energy.
The transaction, which is subject to shareholder and regulatory approvals, is expected to close in Q2-2021.