Calgary-based Baytex Energy is expanding its US presence with a $3.4 billion acquisition of Texas-based Ranger Oil, a pure-play producer in the Eagle Ford shale play..The deal is immediately accretive to earnings and cash flow, allowing it to introduce a 9-cent (1.6%) dividend for the first time in the company’s history..The transaction has been unanimously approved by the boards of directors of each company and is expected to close late in the second quarter. Ranger shareholders will receive 7.49 Baytex shares plus $13.31US cash for each Ranger common share, for total consideration of approximately $44.36US per share. The purchase price includes net debt of approximately $650 million..Affiliates of Juniper Capital Advisors own approximately 54% of Ranger’s common stock and have entered into lockup and support agreements to vote all of the Ranger common stock it owns in favour of the deal..“Upon closing of this transaction, we intend to initiate a dividend, which will be a key means of delivering reliable value to shareholders going forward,” Baytex CEO Eric Greager said in a statement. “We are building an even stronger Canadian energy company with a high-quality diversified oil-weighted portfolio across the Western Canadian Sedimentary Basin and the Eagle Ford.”. Added Ranger boss and Juniper managing partner Edward Geiser: ““This transaction represents a leap forward in shareholder value creation potential and accelerates both companies’ shareholder return strategies.”. The Eagle Ford is a shale formation that stretches from the Mexican border to San Antonio and Austin. It helped kicked off the US shale revolution in 2010 and is considered to be one of the most prolific natural gas and light oil deposits in the Lower 48. Production has fallen sharply in recent years as US shale players struggled with lower prices and rising debt levels.. In a statement Baytex said the acquisition is complimentary to its existing non-operated production and adds about 70,000 barrels of oil equivalent per day weighted 70% to light oil which fetches a premium of $2 per barrel to West Texas Intermediate. The acquired assets cover 162,000 net acres highly concentrated in Gonzales, Lavaca, Fayette and Dewitt counties and on-trend with Baytex’s non-operated position in the Karnes Trough, adding 258 million barrels of proved and probable reserves..Baytex estimates the acreage holds 741 future drilling locations representing an inventory life of 12 to 15 years. Lower Eagle Ford locations are expected to generate internal rates of return (IRR) greater than 75% at oil prices of $75. Baytex believes it can grow production modestly from the acquired assets with two rigs and approximately 50 to 55 net wells per year..Following closing, Baytex expects its gross output to double to 160,000 boe/d, including its Western Canadian holdings. Baytex expects to have approximately 40% of its net crude oil exposure hedged for the 12-month period post-closing. Baytex said it intends to add one senior operational leader to its leadership team in Calgary and retain the Ranger teams operating in Houston. .CIBC Capital Markets and RBC Capital Markets are acting as financial advisors to Baytex and CIBC has provided a fairness opinion. .Investors reacted negatively to the news, sending Baytex (TSE:BTE) shares down nearly 8% or 47 Canadian cents in Toronto this morning, to $5.36.
Calgary-based Baytex Energy is expanding its US presence with a $3.4 billion acquisition of Texas-based Ranger Oil, a pure-play producer in the Eagle Ford shale play..The deal is immediately accretive to earnings and cash flow, allowing it to introduce a 9-cent (1.6%) dividend for the first time in the company’s history..The transaction has been unanimously approved by the boards of directors of each company and is expected to close late in the second quarter. Ranger shareholders will receive 7.49 Baytex shares plus $13.31US cash for each Ranger common share, for total consideration of approximately $44.36US per share. The purchase price includes net debt of approximately $650 million..Affiliates of Juniper Capital Advisors own approximately 54% of Ranger’s common stock and have entered into lockup and support agreements to vote all of the Ranger common stock it owns in favour of the deal..“Upon closing of this transaction, we intend to initiate a dividend, which will be a key means of delivering reliable value to shareholders going forward,” Baytex CEO Eric Greager said in a statement. “We are building an even stronger Canadian energy company with a high-quality diversified oil-weighted portfolio across the Western Canadian Sedimentary Basin and the Eagle Ford.”. Added Ranger boss and Juniper managing partner Edward Geiser: ““This transaction represents a leap forward in shareholder value creation potential and accelerates both companies’ shareholder return strategies.”. The Eagle Ford is a shale formation that stretches from the Mexican border to San Antonio and Austin. It helped kicked off the US shale revolution in 2010 and is considered to be one of the most prolific natural gas and light oil deposits in the Lower 48. Production has fallen sharply in recent years as US shale players struggled with lower prices and rising debt levels.. In a statement Baytex said the acquisition is complimentary to its existing non-operated production and adds about 70,000 barrels of oil equivalent per day weighted 70% to light oil which fetches a premium of $2 per barrel to West Texas Intermediate. The acquired assets cover 162,000 net acres highly concentrated in Gonzales, Lavaca, Fayette and Dewitt counties and on-trend with Baytex’s non-operated position in the Karnes Trough, adding 258 million barrels of proved and probable reserves..Baytex estimates the acreage holds 741 future drilling locations representing an inventory life of 12 to 15 years. Lower Eagle Ford locations are expected to generate internal rates of return (IRR) greater than 75% at oil prices of $75. Baytex believes it can grow production modestly from the acquired assets with two rigs and approximately 50 to 55 net wells per year..Following closing, Baytex expects its gross output to double to 160,000 boe/d, including its Western Canadian holdings. Baytex expects to have approximately 40% of its net crude oil exposure hedged for the 12-month period post-closing. Baytex said it intends to add one senior operational leader to its leadership team in Calgary and retain the Ranger teams operating in Houston. .CIBC Capital Markets and RBC Capital Markets are acting as financial advisors to Baytex and CIBC has provided a fairness opinion. .Investors reacted negatively to the news, sending Baytex (TSE:BTE) shares down nearly 8% or 47 Canadian cents in Toronto this morning, to $5.36.
