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Crescent Point snaps up Spartan Delta assets in $1.7-billion cash deal despite oil price volatility

OIL & BEEF CATTLE 20200910
OIL & BEEF CATTLE 20200910

Oil and gas producer Crescent Point Energy Corp. said it will purchase Spartan Delta Corp.’s Montney assets in Alberta in a $1.7-billion cash deal — the second sizeable acquisition among Canadian explorers and producers this year after 2022 saw a drop in deals thanks to increased volatility in oil prices.

Calgary-based Crescent Point said March 28 that the acquisition will add 600 drilling locations from Alberta’s oil- and liquids-rich Montney play to the company’s inventory, and immediately boost excess cash flow per share by 20 per cent.

“Over the past five years, we have fundamentally rebuilt and strengthened Crescent Point,” chief executive Craig Bryksa said in a statement. “As a result of our efforts, and after closing this transaction, our asset base will include significant inventory depth in both the Kaybob Duvernay and the Montney, while also maintaining significant low-decline assets in Saskatchewan that provide additional excess cash flow.”

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The deal follows last month’s move by Baytex Energy Corp. to acquire U.S. oil and gas company Ranger Oil Corp. in an estimated $3.4-billion deal.

Increasing volatility in oil prices in the months following Russia’s invasion of Ukraine in early 2022 made it difficult for oilpatch buyers and sellers to agree on a price, according to Reuters, citing data from Sayer Energy Advisors that indicates that Canadian upstream deals totalled $15.6 billion in 2022, down 14 per cent from the previous year.

Despite the recent volatility, however, there are indications the Canadian oilpatch could see more M&A activity over the next few months. The executives of nearly 50 Canadian exploration and production companies said they believe there will be at least two or more public transactions over the next six months involving Canadian companies, according to a semi-annual survey by Jeremy McCrea of Raymond James Financial Inc., an investment bank.

McCrea reported that 57 per cent of respondents indicated that their company was likely or highly likely to be involved with M&A activity over the next six months, up from previous surveys.

“Given that balance sheets have improved, commodity prices have pulled back and become more stable, thus making it easier for acquisitions to occur (and why we’re seeing a rise in expectations from our last surveys),” McCrea wrote in a March 27 research note.

Crescent Point shares climbed slightly on news of the acquisition.

The deal is expected to add capacity of 38,000 barrels of oil equivalent per day from the Montney, one of the largest and most lucrative gas resources in North America. The company said the new wells will be profitable even at lower oil prices, estimating their production will break even at prices below US$40 per barrel for West Texas Intermediate (WTI).

WTI crude futures are currently trading around US$73 per barrel.

Spartan shareholders are expected to receive $9.50 per common share through the deal with Crescent Point.

In a release, Spartan said it will focus on developing its remaining Alberta Deep Basin assets and that it will spin off a portion of its remaining production to build a new growth-focused Montney junior company called Logan Energy Corp. with assets in Alberta and British Columbia.

The transaction is expected to close in the second quarter of 2023.

• Email: mcoulton@postmedia.com | Twitter: