The merger will create a light oil weighted company in Western Canada with an enterprise value of $3.12bn
Whitecap Resources has signed an all-stock merger deal worth around C$900m ($703.4m) with rival Canadian energy company TORC Oil & Gas.
The consideration includes TORC’s net debt of C$335m ($261.8m), which will be assumed by Whitecap Resources.
According to Whitecap Resources, the merger will create a light oil weighted company in Western Canada, which will be well-capitalised with an attractive free funds flow profile.
The combined entity will have an enterprise value of nearly C$4bn ($3.12bn). It will be led by Whitecap Resources’ executive team and board of directors.
Based in Calgary, TORC is engaged in light oil operations in southeast Saskatchewan, Cardium development in central Alberta, and also in the Torquay/Three Forks resource play in southeast Saskatchewan.
Whitecap Resources, which was founded in 2009, is focused on aggregating a light oil resource base. The company has operations across Alberta, British Columbia, and Saskatchewan.
It is also the operator of the Weyburn Unit, a carbon capture and utilisation storage project in Southeast Saskatchewan.
In August 2020, the company signed a deal to acquire another Canadian rival NAL Resources from Manulife Financial for about C$155m ($121.15m), which is expected to close in early January 2021.
Merger to boost Whitecap’s presence in core area
Whitecap Resources said that the merger with TORC will considerably boost its scale and dominance in core area, with the latter’s asset base fitting directly into the former’s current core areas.
The enlarged company is expected to be among the largest pure play conventional light oil producers in Canada with more than 100,000 barrels of oil equivalent per day (boe/d). Of these, 78% will be oil and natural gas liquids (NGLs).
Whitecap Resources president and CEO Grant Fagerheim said: “We are combining two strong Canadian energy producers to form a leading large-cap, light oil company geared towards generating sustainable long-term returns for shareholders while prioritising responsible Canadian energy development.
“Despite the challenging conditions and significant volatility throughout the year, we have become an even stronger and more resilient energy producer entering 2021 with the combination with TORC as well as the NAL transaction announced on August 31, 2020.”
As per the merger terms, TORC’s shareholders will be issued 0.57 of Whitecap Resources common shares in exchange for each TORC common share held.
The merger deal is being backed by the Canada Pension Plan Investment Board (CPP Investments), which has been a shareholder in TORC since 2013.
TORC president and CEO Brett Herman said: “We believe our corporate values are closely aligned with Whitecap’s management team and the announced business combination will create an exceptionally resilient energy producer that is positioned for growth, while delivering a sustainable dividend to shareholders.
“In a market environment that is increasingly favouring size and scale, a business combination with Whitecap exposes TORC shareholders to a larger platform while remaining consistent with our existing philosophy of balancing growth with financial discipline along with prudent capital allocation.”
Subject to the meeting of customary conditions such as the receipt of the required regulatory and shareholder approvals, the deal is expected to be completed by late February 2021.