Tamarack Valley To Acquire Clearwater Producer Deltastream Energy In $1.4 Billion Deal

Tamarack Valley Energy (TSX: TVE) is making waves in the oil and gas sector, announcing this morning that it will be acquiring Deltastream Energy Corp for total consideration of $1.4 billion. The transaction is expected to solidify Tamarack’s position as the largest producer in the Clearwater oil play.

The acquisition will see Tamarack add 23,000 boe/d of production to its portfolio, with the transaction expected to provide $500 million of EBITDA for 2023. The acquisition also provides a significant growth opportunity, with over 500 net future development locations in a region where wells payout in less than six months at current oil prices.

In terms of reserves, 13.4 million barrels of oil equivalent are classified as proved developed producing, while 51.0 million barrels of oil equivalent are classed as total proved plus probable.

Under the terms of the transaction, Deltastream will be acquired for $825 million in cash, $300 million in a deferred acquisition payment, and $300 million in shares, which is expected to amount to 80.0 million shares at $3.75 per share. The purchase price equates to 2.9x 2023E EBITDA.

Funding to completion the transaction is expected to come from a number of sources, including the conversion of a $650 million reserve-based credit facility to a fully underwritten $700 million senior secured three year revolving credit facility that is covenant based and sustainability-linked. Additional funding methods include a $275 million senior secured term loan with a maturity of two years, a potential $75 million note offering of 7.25% senior unsecured notes due May 10, 2027, and a $125 million equity offering.

The equity offering will see 33.0 million common shares sold at $3.75 per each, which is expected to close September 27.

“The acquisition of Deltastream solidifies Tamarack as the largest producer in the Clearwater oil fairway. This transaction builds on the Company’s core position in the Clearwater, which is recognized as North America’s most economic play,” said Tamarack CEO Brian Schmidt.

Post transaction, Tamarack is now expecting to produce between 68,000 and 72,000 boe/d in 2023, with EBITDA expected to come in between $1,200 and $1,400 million. The transaction is also expected to expand the firms annual dividend base from $0.12 per share to $0.15 per share.

The transaction is currently expected to close before the end of October.

Separately, it was announced this morning that Topaz Energy (TSX: TPZ) would be acquiring a 5% gross overriding royalty on all current and future oil production from Deltrastream’s Clearwater acreage. The royalty was acquired for cash consideration of $265.3 million.

Tamarack Valley Energy last traded at $3.98 on the TSX.

Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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