Canada-based Baytex Energy and its rival oil producer Raging River Exploration have signed C$2.8bn ($2.13bn) agreement to merge and create a top-tier North American oil producer.
The combined entity, which will have an enterprise value of approximately $5bn and operate under the Baytex name, is expected to be a well-capitalized, oil-weighted company with strong free cash flow generation.
Under the terms of the deal, shareholders of Raging River will receive 1.36 common shares of Baytex for each share held.
Raging River executive chairman and CEO Neil Roszell: “We are uniting two strong oil companies with exceptional people and assets.
“This combination creates a diversified, well-capitalized oil producer that has an impressive suite of high quality producing assets and the ability to materially advance our East Duvernay Shale light oil opportunity, while continuing to develop our Eagle Ford, Viking, Peace River and Lloydminster core assets.
“The combination provides a substantial value proposition for all shareholders of Raging River and Baytex incremental to what each company could deliver on its own.”
The deal, which is planned to be completed in August 2018, is subject to approval by the shareholders of both companies, the Court of Queen’s Bench of Alberta and certain regulatory and other authorities.
Baytex president and CEO Edward LaFehr said: “The merger creates a company with world class assets and a strong balance sheet while retaining substantial torque to higher crude oil prices.
“We will be well-positioned to optimize our capital investment program across our high rate of return asset base.
“The combined company has a dominant 260,000 net acre position in the emerging East Duvernay Shale oil play which has the potential to compete for capital with the best plays in North America.”
With a production capacity of approximately 94,000 boe/d, the combined firm will have diverse portfolio of oil assets that includes the Viking, Peace River, Lloydminster and East Duvernay Shale in Canada and the Eagle Ford in Texas.
In March 2018, Raging River said it had started formal process to initiate a strategic repositioning to enhance shareholder value.
As part of the process, the firm sought to assess broad range of alternatives including, but not limited to, a merger, corporate sale, corporate restructuring, the sale of select assets, the purchase of assets, or any combination of the potential alternatives.