Tourmaline Oil Acquires Two Canadian E&P Companies
TSX-listed Tourmaline Oil Corp. has entered into two separate agreements to acquire Canadian E&P companies Modern Resources Inc. and Jupiter Resources Inc., for a total combined consideration of approximately C$770 million in cash and stock, including the assumption of debt.
Tourmaline will acquire Modern Resources in exchange for a total consideration of approximately C$144 million, including a cash payment of approximately C$74 million, stock consideration of around C$26 million via issuance of 1.5 million Tourmaline shares at a deemed price of C$17.60 per share, and the assumption of C$44 million in debt.
The total transaction value of the Jupiter Resources acquisition is approximately C$626 million, including the issuance of 24.2 million Tourmaline shares, for approximately C$426 million, and the assumption of around C$200 million of debt.
Calgary-based Modern Resources is engaged in acquisition and development activities in the Spirit River and Cardium plays of the Deep basin in Alberta. The company’s assets include over 400 sections of land and future drilling inventory of over 200 locations. Modern Resources reported Proven plus Probable (2P) Reserves of 88 million barrels of oil equivalent (MMboe) as of August 31st, 2020, and current production averages around 9,000 barrels of oil equivalent per day (boe/d). The company’s primary shareholders include funds managed by ARC Financial Corp. and EnCap Investments LP.
Jupiter Resources is focused on the acquisition, development and production of unconventional liquids-rich natural gas properties in Alberta, and was originally backed by investments from funds managed by affiliates of New York-based alternative asset management behemoth Apollo Global Management LLC. The company’s assets include over 500 net sections of land (average 84% working interest), and working interests in gas plants in the Resthaven and Kakwa areas, with a current average production of 67,000 boe/d, and estimated 2P Reserves of 357 MMboe as of December 31st, 2019.
“There are considerable operational, capital, land and facility synergies between the Jupiter and Modern asset bases. The acquisitions are expected to add over $300 million in annual cash flow and yield $130 – $150 million per annum of free cash flow in 2022 and beyond – sufficient to fund Tourmaline’s existing dividend,” Tourmaline said in a statement.
The acquisition of Modern Resources closed on November 2nd, while the closing of the Jupiter acquisition is expected to close on December 16th, subject to the receipt of regulatory approvals.