M&A Action Continues In The Canadian Oil Patch With $1.2 Billion Deal

By Tom Kool - Mar 28, 2023

Yesterday we reported about the Energy Transfer LP takeover of midstream operator Lotus energy and the Brookfield Renewable Partners acquisition of Australia’s Origin Energy for $10 billion.

Today, the M&A action continues upstream in Canada where Crescent Point Energy (CPG.TO) has agreed to acquire $1.24 billion ($1.7B CAD) worth of oil and gas assets in Alberta’s Montney formation from Spartan Delta Corp. (SDE.TO).

According to Crescent Point CEO Craig Bryska, the Montney formation is one of Canada’s most attractive oil plays, boasting strong well economics and low breakeven costs. In an interview with Reuters, Bryska said that Crescent Point's new wells would be profitable even if benchmark West Texas Intermediate crude prices would fall to $40 per barrel.

With the deal, Crescent point acquires 600 drilling locations in the Montney region, adding 38,000 barrels of oil equivalent per day (boe/d) to the company's production capacity.

After a bit of a lull in 2022, M&A action is starting to pick up again in early 2023 as Canadian, but also U.S. oil & gas companies are looking to secure long-term producing assets in de-risked formations in a bid to raise production capacity and guarantee sustainable returns to shareholders.

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At the end of February, Baytex Energy (BTE.TO) announced its merger with Ranger Oil Corp, securing mostly Tier I acreage in the Eagle Ford, securing another 12-15 years of development without further acquisitions.

But perhaps more interesting was the Whitecap Resources acquisition of XTO Energy Canada last summer for a net purchase price of C$1.7 billion. With the deal which closed at the end of last year, Whitecap Resources acquired around 32,000 bpd of producing assets in the Duvernay and Montney formations in Northwest Alberta containing over 20 years of tier one drilling locations.

Canadian energy expert Gurgen Ayvazyan zoomed in on both the Crescent Point and Whitecap acquisitions and crunched the numbers.

While at first sight, the Crescent Point transaction looks like a sweeter deal for its shareholders in the short run in terms of percentage of liquids and value per flowing barrel, Whitecap’s acquisition may make more sense in the long run if oil prices continue to trade above $70 per barrel WTI.

Following today’s deal, Crescent Point raised its production outlook to 160,000 to 166,000 boepd from the earlier forecast of 138,000 to 142,000 boepd.

At 1:12 PM Central Time, Crescent Point shares traded 0.42% lower on the Toronto Stock Exchange, while Spartan Delta saw its share price rise by 6.6%.

By Tom Kool for Oilprice.com