Baytex Energy, Raging River Exploration merge
Combined oil company expected to produce 94,000 barrels per day
Shares of Baytex Energy Corp. and Raging River Exploration Inc. dropped after the intermediate oil and gas producers announced a $2.8-billion deal to merge Monday. The combined company, which will operate under the Baytex name, is expected to have production of approximately 94,000 barrels of oil equivalent per day from a diverse portfolio of oil assets that includes the Viking, Peace River, Lloydminster and East Duvernay Shale regions in Canada and the Eagle Ford region in Texas.
“This is a truly compelling combination that creates an even stronger company,” said Neil Roszell, executive chair and chief executive of Raging River, in a call announcing the deal. “It is a better position for value creation that is well beyond what either of our companies could do on a stand-alone basis.”
Roszell will become chair of the merged company and Baytex chief executive Edward LaFehr will be CEO.
Raging River said they consid- er the merger to be a “win-win combination,” because it expects the deal to be a boon for providing scale to advance East Duvernay Shale operations, diversifying its asset portfolio to include a free-cash-flow-generating asset in the Eagle Ford and to enhance the company’s size and trading liquidity
Meanwhile, Baytex said it adds a free cash flow generating asset in the Viking, increases operatorship, and gives the company exposure to emerging East Duvernay Shale oil activity.
Investors weren’t so keen on the deal though. Baytex shares were down 62 cents or 12.16 per cent to $4.48 in mid-afternoon trading, while Raging River was down 61 cents or 9.71 per cent to $5.67.
Under the agreement, Raging River shareholders will receive 1.36 common shares of Baytex for each Raging River share owned. A statement from the companies puts the market capitalization of the new entity at $2.8 billion.
TD Securities analyst Menno Hulshof said in a note that the deal represents about a 2.5-percent premium to Raging River’s 10- and 20-day volume weighted average share price, while Desjardins analyst Kristopher Zack noted the deal was about a 10-per-cent premium to Raging River’s Friday closing price.
The deal, which requires approval by Raging River and Baytex shareholders, is expected to close in August.