Surge Energy to Acquire Astra Oil in C$160 Million Deal
TSX-listed Surge Energy Inc. has entered into an arrangement agreement to acquire all of the issued and outstanding common shares of privately-held Astra Oil Corp., in a corporate transaction valued at approximately C$160 million, including stock and the assumption of debt.
The transaction consideration is comprised of an initial consideration of approximately C$145 million payable by way of issuing 3.1746 Surge Energy shares for each issued and outstanding share of Astra Oil, and the assumption of approximately C$15 million net debt upon completion, before accounting for transaction costs.
Headquartered in Alberta, Astra Oil is engaged in the production of light oil, with a primary focus on south-east Saskatchewan and south-west Manitoba. The company is also in the process of constructing a 45 km gas gathering infrastructure system to conserve gas at critical facilities in Saskatchewan. As of December 31st, 2020, the total proved plus probable (2P) reserves attributable to the company were approximately 16.6 million barrels of oil equivalent (MMboe), with current average daily production from the assets at approximately 4,100 barrels of oil equivalent per day (boe/d), of which 90% is liquids.
Upon completion, the combined entity will have pro forma 2P reserves of approximately 95.0 MMboe, with estimated average daily production of 20,200 boe/d during 2021.
“We believe this transaction is an exciting opportunity for both Surge and Astra shareholders. Shareholders in the combined company will have ownership in a sustainable, intermediate, light and medium gravity crude oil public company. Shareholders will benefit from Surge’s existing dominant position in the Sparky crude oil play, and from Astra’s highly focused, operated asset base, targeting high value light oil in SE Saskatchewan. We now anticipate that Surge will generate free cash flow of more than $85 million in 2022 at US$65 WTI per barrel pricing, providing free cash flow per share of $0.146 in 2022,” commented Paul Colborne, President & CEO of Surge Energy.
Based in Calgary, Surge Energy is primarily focused on its high quality light/medium crude oil asset base in western and south-eastern Alberta, and the Shaunavon area of south-eastern Saskatchewan.
Scotiabank is acting as the financial advisor, and ATB Capital Markets and BMO Capital Markets are acting as strategic advisors to Surge Energy, while National Bank Financial is advising Astra Oil on the transaction.
The transaction is subject to customary closing conditions, including the receipt of court approval, regulatory approvals, and shareholders approval in a meeting expected to be held in August.