Vermilion adds Spartan to fold in $1.4B takeover

better value,” he said on a conference call.

“Spartan is probably the best example of this out there in that you have a company that is quite capable of rapid production growth.”

It’s the latest in a series of moves by Vermilion to boost its position in Saskatchewan, an area the company prefers for profitability and a favourable regulatory environment as Canadian oil companies struggle with pipeline bottlenecks and prices that have trailed the global rebound.

Vermilion entered the region in 2014 with the purchase of Elkhorn Resources Inc. and added acreage there in 2017 and 2018.

In January, Vermilion bought an unnamed private company with production of about 1,150 barrels of oil per day from wells near the southern SaskatchewanManitoba border for about $91 million in cash.

The Spartan deal is expected to add about 23,000 barrels of oil equivalent per day, taking Vermilion’s overall output to about 95,000 boe/d.

The deal is an opportunistic one for Vermilion and allows Spartan to escape “an increasingly frustrating” market where investors haven’t rewarded its operational expertise with a fair stock price, said analyst Kristopher Zack of Desjardins Capital Markets in a report.

He said he doesn’t think a superior bid will emerge, despite Spartan getting only a five per cent premium over Friday’s closing price, noting there is a $40-million break fee if the deal isn’t completed.

Both company’s boards of directors have endorsed the deal but it must receive at least two-thirds approval from shareholders to be finalized.

Marino said the deal will increase Vermilion’s percentage of production from North America to about 60 per cent from 46 per cent but it will continue its strategy to have geographically diverse holdings.

The company has European production from operations in Ireland, France, Netherlands and Germany and also produces oil from an offshore project in Australia.

Vermilion said it is increasing its overall 2018 production guidance to a midpoint of 88,000 boe/d from 76,000 boe/d previously — it reported about 72,800 boe/d in the fourth quarter.

It said it will increase its 2018 capital budget to $430 million from $325 million to reflect spending planned for the acquired lands.

The deal is the largest oil and gas company takeover in Canada this year.

“At first glance this looks like a very good deal for Vermilion,” Dave Popowich, an analyst at CIBC World Markets said in a note to clients.

“We have seen Vermilion as a natural acquirer of assets in the ongoing industry downturn, and the company clearly sees good value in Canada at current asset prices.” on car emission standards and other measures related to air pollution.

“Trump is already pilot testing this kind of manoeuvre and so far it’s more litigation than action,” he said. “The scientists are clear (on climate change), the world is clear through the Paris agreement ... so that’s where the world is headed.”

Brown added that carbon pricing is an area where some politicians “can make a lot of noise” and urged voters to scrutinize campaign promises.

Wynne said the province has come far in reducing its carbon footprint and has seen economic growth as a result.

“It’s very important that we stay on track but right now we’re in a situation where we have an opponent in Doug Ford and the Conservatives who basically want to take us out of the game,” she said.

The Tories, meanwhile, renewed their commitment to eliminating cap and trade, calling it an expensive tax “that makes life harder for Ontario families and our economy more uncompetitive.”