Acquisition Tourmaline Oil (TOU.TO) has entered into an agreement to acquire its competitor, Bonavista Energy, in a deal worth C$1.45 billion ($1.06 billion) in cash and stock, further solidifying its presence in Western Canada’s Deep Basin.
This acquisition is anticipated to bolster Tourmaline’s standing as the leading Deep Basin producer, with a production estimate of over 600,000 barrels of oil equivalent per day by the end of 2023. RBC Capital Markets analyst Michael Harvey noted, ‘While the initial focus for Bonavista’s assets is expected to be on maintenance, the deal, at first glance, appears to be attractively priced. It aligns well with significant free cash generation and also includes the benefits of substantial embedded tax pools.’ Tourmaline’s stock rose by 1.9% on the Toronto Stock Exchange following this announcement. The offer comprises C$725 million in Tourmaline common shares and C$725 million in cash.
The acquisition is projected to conclude in the latter part of November and is expected to immediately contribute to Tourmaline’s free cash flow in 2024. It will also generate approximately C$450 million in net operating income annually from 2024 to 2026, according to Tourmaline. Bonavista, a major player in the oil and gas industry, was delisted from the Toronto Stock Exchange in 2020 as part of a comprehensive recapitalization plan.
In September, Canadian natural gas company Peyto Exploration & Development (PEY.TO) announced a deal to purchase Repsol’s (REP.MC) Deep Basin assets for $468 million.
Tourmaline has also stated its intention to increase its quarterly dividend by 7.7% and declared a special dividend of C$1 per share for the fourth quarter. ($1 = 1.3626 Canadian dollars)