Headwater will now a 100% working interest in approximately 2,800 barrels per day of medium gravity oil production
Cenovus Energy has completed the sale of its oil assets in the Marten Hills area of Alberta, Canada to Headwater Exploration for C$100m ($77.38m).
Through the acquisition, Headwater will now a 100% working interest in approximately 2,800 barrels per day of medium gravity oil production and 270 net sections of Clearwater rights.
The total consideration includes C$35m ($27.08m) in cash, 50 million common shares of Headwater and 15 million purchase warrants at C$2 ($1.55) per common share with a three-year term.
In addition to the consideration, Headwater has also agreed for a Gross Overriding Royalty (GORR) agreement to allow Cenovus to benefit from future development of the Clearwater formation at Marten Hills.
Headwater has agreed to invest at least C$100m ($77.38m) on the acquired lands by the end of 2022.
The sale was first announced last month. As a result of the transaction, Cenovus now owns 50 million shares in Headwater, which is equal to 25.6% of the company’s issued and outstanding common shares.
Headwater chairman and CEO Neil Roszell said: “With the strong support received from Cenovus, the Headwater team has been able to prepare for an active 2021 development program. The unique high-return assets acquired will provide the catalyst for the next stage of our corporate evolution.
“With Cenovus as a strategic investor and Kam and Sarah adding to the skills and experience of our already strong Board, we are well-positioned for success as a premier publicly traded oil and gas producer focused on asset quality, corporate level returns and sustainability while maintaining a pristine balance sheet.”
Simultaneous to the transaction’s closure, Cenovus conventional senior vice-president, Kam Sandhar and Cenovus corporate services senior vice-president Sarah Walters, have been appointed to Headwater’s board of directors.
Sandhar said: “We look forward to working with Headwater’s highly respected management team as they begin to develop these top-quality oil assets at Marten Hills.
“This is a unique opportunity to get capital and expertise to work right away on a promising portfolio that was unlikely to receive near-term funding from Cenovus, and we believe the closing of this transaction will provide compelling long-term value for Cenovus shareholders.”