Canada's Baytex Energy to buy Ranger Oil for $2.5 billion

(Reuters) - Baytex Energy Corp said on Tuesday that it would buy U.S. peer Ranger Oil Corp in a $2.5 billion cash-and-stock deal, including debt, as the Canadian company looks to significantly boost its presence in South Texas' Eagle Ford shale basin.

The Eagle Ford shale basin currently represents around 30% of Baytex's total production, according to the company's website.

Ranger's shares rose 4% to $42.99 in premarket trade, while U.S.-listed shares of Baytex declined over 3%

The Eagle Ford has seen rising deal activity in recent months. Its proximity to other major energy hubs, including the U.S. Gulf coast, makes it an attractive location. The basin is home to a number of smaller producers, which makes it easier for them to be absorbed by strategic players.

After the deal closure, expected in the second quarter of 2023, the combined entity will be led by Eric Greager, Baytex's chief executive.

As per the deal terms, Ranger shareholders would receive 7.49 Baytex shares plus $13.31 cash, for each common share, for a total consideration of about $44.36 per share, representing a premium of 7.38% to Ranger's last closing price.

Baytex said that the Ranger acquisition would be immediately accretive to key metrics and the company intends to increase direct shareholder returns to 50% of free cash flow, introduce a dividend and increase share buybacks.

Reuters on Monday exclusively reported that the companies were nearing a deal, citing sources.

Baytex's deal would add to the run of Canadian energy operators seeking to boost the amount they produce south of the border.

Ovintiv Inc moved its headquarters to Denver, from Calgary, at the start of 2020 as it prioritized its U.S. assets. Enerplus Corp in December completed the sale of its Canadian operations, leaving it with assets in North Dakota and Pennsylvania.

(Reporting by Sourasis Bose in Bengaluru; Editing by Sriraj Kalluvila and Shailesh Kuber)