Canada’s Vermilion Energy in C$477mn Montney acquisition
Canadian producer Vermilion Energy, active in North America, Europe and Australia, said March 28 it had entered into an all-cash arrangement to acquire the shares of Montney-focused junior producer Leucrotta Exploration for C$477mn (US$380mn).
The acquisition brings 77,000 net acres (31,160 net ha) of Montney mineral rights, primarily in the Mica area of the Peace River Arch straddling the BC-Alberta border, and average expected production in 2023 of 13,000 barrels of oil equivalent (boe)/day. Infrastructure plans are in place to expand that to 28,000 boe/day within a few years, providing anticipated free cash flow of more than C$200mn, based on 2023 strip pricing.
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As part of the arrangement agreement, a portion of the Leucrotta land base and C$43.5mn of cash will be spun off into a new company, ExploreCo, which will be managed by the existing Leucrotta team. Vermilion will acquire a 12.5% equity interest in ExploreCo for about C$14mn, while Leucrotta shareholders will receive one common share and 0.1917 common share purchase warrants of ExploreCo for each Leucrotta share held.
Inclusive of the Leucrotta acquisition, Vermilion has announced about C$1.2bn of acquisitions over the last two years, including the November 2021 acquisition from Equinor of an incremental interest in the Corrib gas field offshore Ireland.
“The Leucrotta acquisition is an important component of our strategic plan as it is a scalable asset and is expected to provide us with 20+ years of high value Tier 1 drilling inventory,” Vermilion CEO Dion Hatcher said. “Our previously announced Corrib acquisition increases our European gas exposure and accelerates our debt reduction. With the successful completion of both deals, our $1.0bn debt reduction target should be achieved by the end of this year, three years ahead of schedule.”
The acquisition, including a C$20mn break fee payable to Vermilion, remains subject to certain closing conditions, including judicial, shareholder, securityholder and regulatory approvals. It is expected to close in late May 2022.