Peyto Exploration to acquire Repsol Canada for US$468mn
Peyto Exploration & Development, a major Deep Basin producer in western Canada, said September 6 it had reached an agreement to acquire Repsol Canada Energy Partnership, the Canadian upstream oil and gas business of Spain’s Repsol, for US$468mn (C$636mn).
The acquisition will be funded through an upsizing of Peyto’s existing revolving credit facility, a new two-year amortising term loan and net proceeds from a C$175 million equity offering. The equity offering was intended initially as a C$125mn bought deal offering of subscription receipts but was subsequently upsized based on strong demand from a syndicate of underwriters led by BMO Capital Markets, CIBC Capital Markets and National Bank Financial.
The all-cash deal includes 455,000 net acres (average 65% working interest) of Deep Basin lands in the Edson area, west of Edmonton, that are directly adjacent to and overlapping Peyto’s existing assets. Production from the acquired lands averages about 23,000 barrels of oil equivalent (boe)/day, of which about 75% is natural gas.
The assets have not been drilled over the last several years, and Peyto has identified more than 800 potential gross drilling locations that will provide several years of high-quality drilling inventory and a path to 100,000 boe/day of production. Independent reserves evaluator GLJ has booked 297 of the locations and estimated proved reserves associated with the acquired lands at 409.4bn ft3 of natural gas and 21.6mn barrels of oil and liquids. Proved plus probable (2P) gas reserves have been estimated at 1,544bn ft3 and 2P liquids reserves at 49.3mn barrels.
“This acquisition marks a very important milestone for Peyto,” CEO Jean-Paul Lachance said. “The Repsol assets fit perfectly with Peyto’s existing Deep Basin acreage and offer a significant number of top-tier undeveloped locations that will immediately compete for capital within our portfolio.”
Also included are five operated natural gas plants, one of which is currently suspended, with combined net processing capacity of about 400mn ft3/day of natural gas; 2,200 km of operated pipelines and a 12 MW cogeneration power plant.
With the acquisition, Peyto will solidify its dominant Deep Basin position, with 1.2mn net acres of delineated lands, 1,592 gross booked drilling locations and 1.5bn ft3/day (gross) of gas processing capacity that will only be 52% utilised.
Repsol retains ownership of its St John LNG import facility in New Brunswick and its trading business.
The Spanish major said the sale was “part of its ongoing portfolio management to focus on core regions.”
The acquisition is expected to close in mid-October, subject to customary closing conditions, including the receipt of necessary regulatory approvals.