CALGARY—Pinecrest Energy Inc. and Spartan Oil Corp. are joining forces to create a new billion-dollar company capable of snapping up big oil assets that both have long coveted, but neither had the heft to acquire on its own.
The combined company’s balance sheet strength “opens up the door to large, transformational assets that we would not be able to participate in before individually,” said Pinecrect CEO Wade Becker.
Pinecrest is focused on the Red Earth area of north-central Alberta while Spartan is involved in the Cardium light oil formation in central Alberta and the Bakken light oil region in southeast Saskatchewan.
The new firm, which may operate under a different name, will be led by Becker and the existing Pinecrest management team.
Spartan CEO Richard McHardy will join the merged company’s board at closing, as will current Spartan director Don Archibald.
The companies see the combined entity having an enterprise value of close to $1 billion, taking into account Spartan’s stock market value of just under $427 million, Pinecrest’s stock market value of $400 million and net debt at the time of closing.
Production in 2013 is expected to be relatively flat compared with the combined 9,600 barrels of oil per day both firms anticipate churning out this year.
The deal is subject to approval by at least two-thirds of shareholders of both companies as well as regulatory and court approvals.
Directors and officers of Spartan, who collectively hold approximately 27% of that company’s shares have agreed to support the deal as have directors and officers of Pinecrest, who collectively hold approximately 24%.
Both have agreed not to solicit competing bids, have been granted the right to match competing proposals and agreed to $12.5-million non-completion fees under certain circumstances.
©The Canadian Press