Size matters.Canada’s largest natural gas producer got a lot bigger on Monday after Tourmaline Oil Corp. announced it is buying long-time Calgary rival Bonavista Energy for $1.45 billion in cash and shares.In what is expected to be a major round of consolidation in the oil patch, Tourmaline will pay $754 million in cash along with an equal amount of shares, less debt. .In addition, Tourmaline hiked its dividend by eight cents a share, or 7.7%. The deal is expected to close in November, just in time for the winter drilling season. Post closing, Tourmaline expects to be producing more than 600,000 barrels of oil equivalent, consisting of mostly natural gas and associated liquids, which are counted as oil.In a news release, Tourmaline said the deal is part of its longer-term growth strategy in the so called ‘Deep Basin’ in northwestern Alberta, a region along the foothills known for thousands of metres of ultra-deep rock layers that need to be hydraulically fracked.“The Bonavista assets are a natural extension of Tourmaline’s existing operations in the Deep Basin where the company is already the largest producer,” it said. It’s also a ringing endorsement f the long-term future of natural gas both in Alberta and abroad, where Tourmaline has long-term LNG export deals in the Gulf of Mexico. Also included are more than 1.2 million acres of land.It comes after last week’s $60 billion mega-tie up between ExxonMobil and Pioneer Natural Resources in Texas’ Permian shale basin, prompting analysts to warn of similar deals on this side of the border as LNG projects start to materialize after 2025.“People are definitely going to run out of inventory over the next several years,” Pioneer's CEO Scott Sheffield said. “That should lead to extreme consolidation.”Micheal Dunn, a managing director with Stifel brokerage and advisory in Calgary, was bullish on the deal and Tourmaline in particular.“We are positive on the deal given the accretive metrics, synergies and added scale for (Tourmaline),” he wrote in a research note.Investors were equally enthusiastic, pushing Tourmaline shares up $1.38 or nearly 2% on the Toronto Stock Exchange Monday, their highest since January. Bonavista’s shares were delisted in August 2020 after it exchanged virtually all its shares for debt during the pandemic.
Size matters.Canada’s largest natural gas producer got a lot bigger on Monday after Tourmaline Oil Corp. announced it is buying long-time Calgary rival Bonavista Energy for $1.45 billion in cash and shares.In what is expected to be a major round of consolidation in the oil patch, Tourmaline will pay $754 million in cash along with an equal amount of shares, less debt. .In addition, Tourmaline hiked its dividend by eight cents a share, or 7.7%. The deal is expected to close in November, just in time for the winter drilling season. Post closing, Tourmaline expects to be producing more than 600,000 barrels of oil equivalent, consisting of mostly natural gas and associated liquids, which are counted as oil.In a news release, Tourmaline said the deal is part of its longer-term growth strategy in the so called ‘Deep Basin’ in northwestern Alberta, a region along the foothills known for thousands of metres of ultra-deep rock layers that need to be hydraulically fracked.“The Bonavista assets are a natural extension of Tourmaline’s existing operations in the Deep Basin where the company is already the largest producer,” it said. It’s also a ringing endorsement f the long-term future of natural gas both in Alberta and abroad, where Tourmaline has long-term LNG export deals in the Gulf of Mexico. Also included are more than 1.2 million acres of land.It comes after last week’s $60 billion mega-tie up between ExxonMobil and Pioneer Natural Resources in Texas’ Permian shale basin, prompting analysts to warn of similar deals on this side of the border as LNG projects start to materialize after 2025.“People are definitely going to run out of inventory over the next several years,” Pioneer's CEO Scott Sheffield said. “That should lead to extreme consolidation.”Micheal Dunn, a managing director with Stifel brokerage and advisory in Calgary, was bullish on the deal and Tourmaline in particular.“We are positive on the deal given the accretive metrics, synergies and added scale for (Tourmaline),” he wrote in a research note.Investors were equally enthusiastic, pushing Tourmaline shares up $1.38 or nearly 2% on the Toronto Stock Exchange Monday, their highest since January. Bonavista’s shares were delisted in August 2020 after it exchanged virtually all its shares for debt during the pandemic.
