Corporate M&A

Canadian Natural Resources Acquires Painted Pony Energy

By Mahati K L
August 11, 2020
2 minutes read
Gas Flare

Canadian Natural Resources Ltd. (CNRL) has entered into a definitive arrangement agreement to acquire all the issued and outstanding common shares of Painted Pony Energy Ltd. in an all-cash corporate transaction valued at approximately C$461.1 million, including debt adjustments.

Under the terms of the agreement, Painted Pony shareholders will receive a cash consideration of CAD0.69 for each share held, representing a ~30% premium over the 20-day volume weighted average price of the company’s shares. Based on approximately 161 million Painted Pony shares issued and outstanding (as of March 31st, 2020), the equity offer is worth C$111.1 million. Adjusting for Painted Pony’s existing total reported debt of about C$350 million, the total implied transaction value is approximately C$461.1 million.

The transaction value represents approximately 1% of CNRL’s enterprise value and does not materially impact its balance sheet strength or liquidity position, the company said in a statement.

“This acquisition further strengthens Canadian Natural’s natural gas assets and production base in key operating areas and complements the company’s diversified portfolio. This transaction also allows us to further insulate against natural gas costs in our oils sands operations and has minimal impact on the company’s low overall corporate decline rate,” said CNRL President Tim McKay.

TSX-listed Painted Pony is engaged in the exploration, development, and production of petroleum and natural gas resources from the Montney Formation in the Blair, Daiber, Kobes, and Townsend areas of north-east British Columbia. The company reported proven reserves of approximately 496.3 million barrels of oil equivalent (MMboe) as of December 31st 2019, of which approximately 93% was gas and about 31% was in the proved developed category. Current production (before royalties) from Painted Pony’s assets is approximately 49,600 barrels of oil equivalent per day (boe/d), of which about 91% gas.

Painted Pony had initiated a confidential process to explore opportunities to enhance shareholder value as a result of weak natural prices over the past three years, a more recent decline in natural gas liquids prices, and the company’s limited ability to access external markets on an accretive basis.

“After reviewing Painted Pony’s current circumstances and the proposals received in connection with the process, the board determined that the transaction represented the best alternative for Painted Pony’s shareholders given current industry, economic and capital markets conditions,” Painted Pony said in a statement.

TD Securities, RBC Capital Markets, and Raymond James are acting as financial advisors to Painted Pony on the deal.

The transaction has been approved by Painted Pony’s board of directors, and is expected to close in Q3 or Q4-2020, subject to shareholder and regulatory approvals, and other customary closing conditions. Upon completion, the Painted Pony shares will be delisted from the TSX.

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