Under the terms of the deal, PrairieSky will acquire royalty assets including 5.4 million acres in Western Canada which represent about 6,700 barrels of oil equivalent per day, for $680m in cash and issuance of approximately 44.4 million PrairieSky common shares.
The deal is expected to provide PrairieSky, a royalty business spun off by Encana in 2014, with a royalty-land asset base of more than 14.7 million acres in total.
Canadian Natural president Steve Laut said: "Canadian Natural explored a number of options to maximize value for our royalty portfolio and the Transaction with PrairieSky provides Canadian Natural shareholders with an opportunity to directly and indirectly participate in the largest and most dominant oil and natural gas royalty enterprise in Canada.
"In addition, Canadian Natural through a leasing arrangement and drilling commitment with PrairieSky on a portion of the fee simple mineral title lands divested to PrairieSky, has preserved the right to develop a core area on approximately 104,000 acres of undeveloped lands in Western Saskatchewan, which we believe are prospective for the development of heavy oil."
The acquisition is a part of PrairieSky’s effort to purchase oil and natural gas royalty assets, which would provide near-term accretion as well as medium-term to long-term value enhancement potential through all commodity cycles.
The transaction proceeds will be used by Canadian Natural to reduce its debt-to-book value to about 36% from about 38% as well as to increase its credit line from C$3.4bn to C$4.1bn.
The deal is planned to be completed by the end of this year.
Last year, PrairieSky agreed to acquire Range Royalty, a private oil and gas royalty company with approximately 3,000 boe/d of high quality royalty production and 3.5 million acres of royalty lands, for C$699m in stock.
