Strathcona to acquire Pipestone to create large public Canadian oil and gas producer

Strathcona Resources Ltd. has agreed to acquire Pipestone Energy Corp. in an all-share deal that would create the fifth largest liquids producer in Canada measured by production and reserves.

The combined company, which will continue as Strathcona Resources Ltd., will become a public reporting issuer with three core areas, each with meaningful scale and inventory, and a balance of heavy oil, condensate and NGLs, and natural gas production, the companies said in a joint release Aug. 1.

The combine will hold current production of about 185,000 boe/d (70% oil/condensate, 78% total liquids), across three concentrated areas: Cold Lake Thermal (55,000 b/d), Lloydminster Heavy Oil (55,000 b/d), and Montney (75,000 boe/d).

Strathcona will be led by Adam Waterous (executive chairman), Rob Morgan (president and chief executive officer), Connor Waterous (senior vice-president and chief financial officer), and Strathcona's executive team. 

Following completion of the Transaction, existing Pipestone shareholders will receive about 9.05% of the pro forma equity in the combine on a fully diluted basis (8.87% basic), equating to an exchange ratio of 0.067967 of the combined company shares per Pipestone share. Existing Strathcona shareholders, comprised of Waterous Energy Fund (99.7%) and Strathcona employees (0.3%), will own the balance.

The exchange ratio implies an initial market capitalization of about $8.6 billion (Can.), which, when combined with $2.9 billion (Can.) in pro forma debt outstanding, equates to an initial enterprise value of $11.5 billion (Can.).

Completion of the deal is expected early in this year’s fourth quarter, subject to customary conditions.