Strathcona Resources (TSX: SCR) has agreed to buy Greenfire Resources (TSX: GFR) for as much as $2.9 billion, including debt. The deal makes it Canada’s fourth largest steam-assisted oil sands operator, increasing Strathcona’s production profile by 29%.
Greenfire shareholders can choose to receive $11.00 in cash per share, a 39% premium to Friday’s close, or 0.25 Strathcona shares, which works out to $9.09, a 15% premium. Total cash is capped at $740 million, and Strathcona expects to issue 43 million to 60 million new shares. It will also take on $550 million of Greenfire’s net debt.
Waterous Energy Fund owns 72% of Greenfire and 57% of Strathcona, and has agreed to take shares. Because the fund sits on both sides, the deal needs approval from minority shareholders. Closing is expected in late January 2027.
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Together, the two companies have produced 153,000 bbl/d so far this year and hold more than 3 billion barrels of proved plus probable reserves. Strathcona expects $75 million a year in savings from combining them.
Strathcona announced the deal with its third quarter results. Total revenue and other income came to $1.26 billion, down from $1.40 billion in the second quarter. Net income fell to $298 million from $333 million, or $1.39 per share.
Operating earnings, the company’s adjusted measure, were essentially flat at $371 million, or $1.73 per share. Lower oil prices did most of the damage. West Texas Intermediate averaged US$85.79 a barrel, down from US$92.77 a quarter earlier.
Most of the $286 million in free cash flow went to paying down debt, which brought net debt down to $1.71 billion from $1.93 billion. The board also raised the quarterly dividend 7% to C$0.32 per share.
Production averaged 123,486 boe/d, up 6% from the second quarter. Even so, output for the year so far is about 119,000 bbl/d. That’s below the 122,000 to 128,000 bbl/d range the company set in August, and the fourth quarter will need to average roughly 130,000 bbl/d just to reach the low end.
Meota Central accounts for part of the gap. Only 9 of its first 16 well pairs are producing, and the other 7 have been pushed to early 2027 after the company changed how it starts them up.
Per barrel, margins got thinner. Royalties rose to C$22.97/boe from C$21.92/boe, and operating earnings fell to C$32.50/boe from C$35.66/boe. Energy operating costs dropped to C$5.77/boe, but non-energy costs rose to C$10.56/boe.
Strathcona Resources last traded at $36.34 on the TSX.
