Crescent Point Energy has entered into an arrangement agreement to acquire all of the issued and outstanding shares of Legacy Oil + Gas.
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Legacy is a publicly-traded, light oil-weighted producer with approximately 22,000 boe/d of high-netback production, of which more than 15,000 boe/d is from conventional and unconventional plays in Crescent Point’s core southeast Saskatchewan, Manitoba and North Dakota areas.
The assets to be acquired include approximately 1,000 net sections of land, of which approximately 525 net sections are in southeast Saskatchewan. The southeast Saskatchewan lands include approximately 200 net sections in the emerging and highly-economic Midale light oil resource play.
Total consideration is approximately $1.53 billion, comprised of approximately 18.97 million Crescent Point common shares and the assumption of approximately $967 million of net debt, estimated as at the time of closing and inclusive of transaction costs.
Assuming the successful completion of the legacy arrangement on or about June 30, 2015, Crescent Point is upwardly revising its 2015 guidance for production and capital expenditures.
The company’s 2015 average daily production rate is expected to increase by approximately 6.6 percent to 162,500 boe/d from 152,500 boe/d, which is based on average second half 2015 production of approximately 20,000 boe/d from the Legacy Assets.
Capital expenditures for the year are expected to increase by $100 million to $1.55 billion. Approximately 65 percent of the incremental capital expenditures is expected to be directed towards drilling and completions, with the remainder used for facilities and land investments.
Crescent Point expects to revisit its capital budget during third quarter 2015 based on the company’s continued efforts to improve overall capital costs and efficiencies, as well as its outlook for commodity prices.
In connection with the legacy arrangement, Crescent Point has entered into an agreement, on a bought deal basis, with a syndicate of underwriters for an offering of 21,060,000 Crescent Point common shares at $28.50 per share to raise gross proceeds of approximately CDN$600 million.
Crescent Point has also granted the underwriters an over-allotment option to purchase, on the same terms, up to an additional 3,159,000 Crescent Point common shares. This option is exercisable, in whole or in part, by the underwriters at any time until 30 days after closing.
The maximum gross proceeds raised under the Financing will be approximately CDN$690 million, should this option be exercised in full. Closing is expected to occur on or about June 16, 2015.
Although the net proceeds of the Financing are expected to be used to reduce indebtedness assumed in connection with the legacy arrangement, the Financing is not conditional on the closing of the legacy arrangement.
The successful completion of the legacy arrangement, in combination with the proposed Financing, is expected to be accretive to Crescent Point’s per share reserves, production and cash flow on a debt-adjusted basis. ■