Canada’s CNRL to Acquire Montney Producer
Canadian Natural Resources Limited (CNRL), a senior producer primarily active in the oil sands region of northeastern Alberta, said August 10 it has agreed to acquire Montney-focused Painted Pony Energy for C$461mn (US$345mn).
The agreed transaction consists of an all cash offer of C$0.69/share – a 30% premium over the 20-day volume-weighted average of Painted Pony’s shares – and the assumption of C$350mn of debt.
Painted Pony produces about 270mn ft3/day of natural gas and 4,600 b/d of natural gas liquids from the Blair, Daiber, Kobes and Townsend areas in northeastern BC. The acquired assets are all within CNRL’s core natural gas area, providing opportunity to leverage synergies with a significant amount of pre-built infrastructure and transportation available, CNRL said.
“This acquisition further strengthens Canadian Natural’s natural gas assets and production base in key operating areas and complements the company’s diversified portfolio,” CNRL CEO Tim McKay said. “This transaction also allows us to further insulate against natural gas costs in our oils sands operations and has minimal impact on the company’s low overall corporate decline rate.”
The transaction value represents about 1% of CNRL’s enterprise value.
In the second quarter this year, CNRL produced 1.43bn ft3/day of natural gas in Canada, half of which was used internally at its thermal heavy oil and bitumen operations. About a third was exported to markets elsewhere in Canada and the US, while the rest was exposed to intra-Alberta pricing.
Painted Pony said the transaction with CNRL emerged after the company’s board initiated a confidential process, overseen by independent directors, to explore opportunities to enhance shareholder value.
“Weak prices for natural gas over the past three years and a recent decline in natural gas liquids prices have resulted in lower than expected adjusted funds flow,” the company said. “This sustained period of low adjusted funds flow, as well as Painted Pony’s limited ability to access external markets on an accretive basis, has deprived Painted Pony’s asset base of the capital necessary to fund meaningful development.”
The arrangement agreement includes a C$20mn non-completion penalty, and is expected to close late in Q3 or early in Q4, subject to normal closing conditions and approval by Painted Pony shareholders at a special meeting planned for September.