Monday, February 15, 2021

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Arc Resources, Seven Generations merging in major Montney Natural Gas tie-up

Noah Zivitz, BNN Bloomberg
Feb 11, 2021

Arc Resources Ltd. and Seven Generations Energy Ltd. announced a tie-up late Wednesday, in a transaction that would bring together a pair of major players in Canada's Montney region.

Under the terms of the transaction, Seven Generations shareholders will receive 1.108 Arc shares for each share held. Once the deal closes, Arc's shareholders will own 49 per cent of the combined entity and Seven Generations holders will own 51 per cent, according to a joint media release. The combined company will retain Arc's name and will be headquartered in Calgary.

According to the release, the combined company will be "the largest pure-play Montney producer" with annual production hitting 340,000 barrels of oil equivalent per day across 1.1 million acres of land. The companies said they see potential for $110 million in annual cost savings by next year.

According to the companies, the combined entity would be the sixth-largest upstream energy producer in Canada. The combined firm plans to continue to pay Arc’s current $0.06 per share quarterly dividend, subject to approval from its board.

While Seven Generations' investors will hold a narrow majority of the shares, Arc will have a stronger hand in the boardroom. Indeed, the two companies said the combined entity's board of directors will have 11 members, with six seats occupied by Arc appointees.

Arc Chair Hal Kvisle, an industry veteran who has previously served as CEO of TransCanada Corp and Talisman Energy Inc., will remain chair after the deal closes, while Arc President and CEO Terry Anderson will hang on to those titles.

The deal is subject to customary closing conditions, including a vote by Seven Generations shareholders on the offer, and a vote by Arc shareholders on the necessary share issuance.

Canada Pension Plan Investment Board, which owns 16.8 per cent of Seven Generations' shares, has already confirmed its intent to support the offer, according to the release.

The two companies said they expect the deal to close in the second quarter of this year.

RBC is serving as Arc's financial advisor on the deal, while CIBC is advising Seven Generations.

CPPIB OUR NATIONAL PENSION FUND INVESTS IN FRACKING

Oil and gas production

The Montney Formation is a major shale gas and tight oil resource. A comprehensive joint study on the potential of the Montney Formation was completed by the National Energy Board, British Columbia Oil and Gas Commission and the Alberta Energy Regulator in 2013. This study found that the potential resources contained within the formation were 449 trillion cubic feet of marketable natural gas, 14,521 million barrels of marketable natural gas liquids (NGLs) and 1,125 million barrels of oil. This estimate makes it one of the largest known gas resources in the world and equivalent to 145 years of Canada's 2012 consumption.[5][6]

Gas is produced from the Montney Formation in both British Columbia and Alberta. Major operators include Seven Generations Energy Ltd., Progress Energy Canada Ltd. (a subsidiary of Malaysia's (PETRONAS), Painted Pony Energy Ltd., Royal Dutch Shell plc, Encana Corporation, Murphy Oil Corporation, ARC Resources Ltd., and Advantage Oil & Gas Ltd.[7][8] and oil is produced from the formation in Northern Alberta.[4] Horizontal drilling and extensive fracturing process is necessary to have the fluid flow through the low permeability siltstone. Shale gas extraction emerged in the late 2000s in the distal facies of the formation's western extent.

Hydraulic fracturing in Canada

Massive hydraulic fracturing has been widely used in Alberta since the late 1970s.[9]:1044 The method is currently used in development of the CardiumDuvernay, Montney and Viking formations in AlbertaBakken formation in Saskatchewan, Montney and Horn River formations in British Columbia.

https://en.wikipedia.org/wiki/Montney_Formation

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