The acquisition is expected to complement existing assets of Penn Virginia
Penn Virginia shareholders are expected to own around 87% of the combined company. (Credit: Tumisu from Pixabay.)
US-based oil and gas company Penn Virginia has signed an agreement to acquire Lonestar Resources in an all-stock transaction valued at nearly $370m.
Based in Fort Worth, Texas, Lonestar is an independent oil and natural gas company focused on the development, production, and acquisition of unconventional oil, natural gas liquids (NGLs), and natural gas properties in the Eagle Ford Shale.
The company claims to have accumulated approximately 72,682 gross acres in the Eagle Ford Shale.
The acquisition is expected to complement existing assets of Penn Virginia and provide annual synergies of over $20m.
Penn Virginia president and chief executive officer Darrin Henke said: “This is an exciting time for Penn Virginia as we expand our Eagle Ford footprint with the high-quality assets of Lonestar.
“This transaction further solidifies the Company’s position as a premier Eagle Ford operator and provides additional scale and synergies while still delivering operational excellence.
“Consistent with our disciplined strategy, this transaction is expected to be accretive to free cash flow and certain other key per share metrics to deliver long-term value to shareholders.
“The benefits of basin consolidation are very compelling, and we strongly believe this is a value-creating opportunity for both companies.”
Under the terms of the agreement, Lonestar shareholders are expected to receive 0.51 shares of Penn Virginia common stock for each outstanding Lonestar share held.
The transaction is expected to close in the second half of 2021, subject to customary closing conditions, including the approval of Penn Virginia and Lonestar shareholders.
Upon closing, Penn Virginia shareholders are expected to own around 87% of the combined company, while Lonestar will own nearly 13% of the combined company.
Evercore, BofA Securities, and RBC Capital Markets are acting as financial advisors to Penn Virginia in relation with the transaction, while Kirkland & Ellis is its legal advisor.
Lonestar chief executive officer Frank D Bracken, III said: “In today’s environment, size and scale are paramount, both in terms of operations and in the public markets.
“The merger exposes Lonestar shareholders to a substantially larger, more liquid, publicly-listed platform and the combination of the two companies’ high quality, liquids-focused operations should provide significant benefit to both shareholder groups, positioning the Company as a dominant force in the Eagle Ford Shale.”
In Mar 2019, Denbury Resources has scrapped its $1.7bn deal to acquire Penn Virginia, citing difficult market conditions and lack of shareholders’ support.