Imperial Oil asset sale signals big year for deal-making
roughly four times, and its stock closes more than 10 per cent above the issue price.
But that’s what happened Monday after Calgary’s Whitecap Resources announced an $855-million deal to acquire a portfolio of light oil and natural gas assets from industry giant Imperial Oil.
The assets, located in westcentral Alberta and northeastern British Columbia, produce the equivalent of about 15,000 barrels of oil per day, split evenly between oil and natural gas.
For Whitecap, a well-regarded, fast-growing junior player, the deal is expected to boost fully diluted cash flow per share by seven per cent this year and 23 per cent in 2015, and allow it to hike its monthly dividend payout by 10 per cent.
ForImperial,sheddingnoncore assets will let it focus on its far larger unconventional operations, including the massive Kearl oilsands mine, which began production a year ago and is expected to reach output of 345,000 barrels of oil per day by 2020.
Whitecap’s shares jumped more than seven per cent Monday to close at $12.34 each on the Toronto Stock Exchange. The closing price was $1.14 or 10 per cent above the price at which Whitecap completed a $500-million bought deal with a group of investment dealers.
Under the deal’s terms, Whitecap issued more than 44.6 million subscription receipts at $11.20 apiece. Once regulatory approvals are obtained and the deal closes, each receipt can be exchanged for one Whitecap common share.
For industry observers, the Whitecap-Imperial deal is just the latest sign that dealmaking activity in the oilpatch is on the upswing, after a sluggish year in 2013.
Mason Granger, an oil and gas fund manager with Toronto-based Sentry Investments, says the rebound in energy share prices over the past year and improved access to capital, especially for top-performing junior producers like Whitecap, has helped to accelerate merger and acquisition activity.
“Going back to 2011, 2012 and the first half of 2013, that was a pretty tough time for energy stocks. But we saw signs of life at the end of last year, and financing activity picked up markedly in the second half of 2013, which I viewed as an important precursor of M&A (merger and acquisition) activity this year,” he says.