Crescent Point Drops $1.7 Billion To Acquire Spartan Delta’s Montney Assets
Consolidation continues apace in the Canadian oil and gas sector. Crescent Point Energy (TSX: CPG) this morning indicate it has reached a $1.7 billion deal to acquire Spartan Delta Corp’s (TSX: SDE) Montney assets in an all-cash transaction.
The transaction will see Crescent Point add 600 Montney locations in Alberta to its inventory, providing what is said to be 20 years worth of drilling opportunities. The purchase is said to be immediately accretive, and is expected to increase excess cash flow per share by 20%, while the deal is slated to add 38,000 boe/d to the firms operation.
“As a result of our efforts, and after closing this transaction, our asset base will include significant inventory depth in both the Kaybob Duvernay and the Montney, while also maintaining significant low-decline assets in Saskatchewan that provide additional excess cash flow. The Montney acquisition is immediately accretive to our per share metrics, enhances our return of capital to shareholders, and is aligned with our long-term strategy to focus on high quality, scalable resource plays that meet our defined asset criteria,” commented CEO Craig Bryksa.
Based on US$70 – $75/bbl WTI pricing, the transaction is said to come in at 3.2-3.4x annual net operating income, or $44,740 per flowing boe. In terms of 2P reserves, the price amounts to $8.23 per boe, based on 2P reserves of 206.7 MMboe.
Found adjacent to Crescent Point’s Kaybob Duvernay assets, the purchase covers 235,000 net acres of contiguous land within the Gold Creek and Karr area, with the land base primarily being crown land for which the company will have an average working interest of 96%. Infrastructure and licensing is also said to be in place that will support additional development plans.
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Type wells from the newly purchased assets are slated to have a payback period of 10 months at current pricing, while also remaining economic to sub-US$40/bbl WTI.
Following the transaction, Crescent Point intends to continue to return 50% of its discretionary cash flow to shareholders, in addition to the base dividend currently offered. That base dividend is also targeted to increase over time, even at times of lower commodity pricing.
The $1.7 billion price tag is expected to be funded via the firms existing credit facilities, although Crescent Point is said to have added a new two year revolving $400 million credit facility for additional liquidity. Unutilized credit capacity following the acquisition is said to sit at $850 million.
Crescent Point now expects to post average annual production in 2023 of 160,000 to 166,000 boe/d, with development expenditures of $1.15 to $1.25 billion.
Crescent Point Energy last traded at $9.06 on the TSX.
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