Baytex Energy To Acquire Ranger Oil In US$2.5 Billion Deal
Baytex Energy (TSX: BTE) is expanding its presence in the Eagle Ford region of the United States with the acquisition of Ranger Oil Corporation (NASDAQ: ROCC). Total consideration for the transaction, including the assumption of debt, is pegged at C$3.4 billion.
The transaction will see Ranger Oil shareholders receive a meager 7.6% premium, with payment to come in the form of both cash and shares. Shareholders of Ranger Oil will receive 7.49 Baytex shares plus US$13.31 in cash for each share held, amounting to a figure of US$44.36 per share. Baytex has indicated it will fund the acquisition via expanded credit facilities as well as the issuance of debt.
“The transaction more than doubles our EBITDA and nearly doubles our free cash flow. The Ranger inventory immediately competes for capital in our portfolio and brings 12 to 15 years of quality oil-weighted drilling opportunities. We are building quality scale and a more durable business with a lower break-even WTI price,” commented Baytex CEO Eric Greager on the acquisition.
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The purchase is being pushed by the firm as being accretive on key per share metrics, including free cash flow, which will see a 20% bump, adjusted funds flow, which will see a 24% increase, and production, which is expected to improve 12%. The company has further worked to get investor confidence by indicated the deal will allow an “immediate step-up in direct shareholder returns,” which are to now amount to 50% of free cash flow, increasing to 75% upon achieving a total debt target of $1.5 billion.
As part of the transaction, the company intends to introduce a quarterly dividend amounting to $0.0225 per share, equating to a 1.6% annual yield, which would be fully funded to US$47 per barrel WTI. Buybacks are also set to increase, although further details were not provided.
Operationally, the acquisition will see the company gain 162,000 net acres in Eagle Ford shale, on trend with Baytexs current assets in the region. Production amounts to 67-70 Mboe/d of working interest, and 174 MMboe of proved reserves, and 258 MMboe of proved plus probable reserves. Inventory meanwhile be enhanced with a total of 741 net undrilled locations, providing an inventory life of 12 to 15 years.
Following closing, Baytex’s production is estimated as being between 155,000 to 160,000 boe/d for the twelve months following closing, with pro forma annual EBITDA pegged at $2.4 billion and free cash flow of $1.0 billion.
The transaction is currently slated to close late in the second quarter of 2023, subject to a majority of Ranger Oil shareholders approving the transaction at a special meeting, among other items.
Baytex Energy last traded at $5.83 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.
