CALGARY — Whitecap Resources Inc. is cementing its position as a consolidator of conventional oil and gas plays in Western Canada with a friendly $550-million all-stock deal to buy Calgary rival TORC Oil & Gas Ltd.
Shares in both companies soared on Wednesday morning, with Whitecap gaining as much as 61 cents or 14 per cent to $4.96 and TORC jumping 26 cents or 10 per cent to as much as $2.85.
The merger of the two companies comes as Whitecap awaits the close of its $155-million all-stock deal to buy private oil and gas producer NAL Resources Ltd. expected in early January.
Under the agreement, each TORC share held can be exchanged for 0.57 of a Whitecap share, valuing it at $550 million based on closing stock prices Tuesday. The deal is expected to close in late February if approved by a two-third majority vote by TORC shareholders and a simple majority vote by Whitecap’s shareholders.
Whitecap CEO Grant Fagerheim says the deal is attractive because of the companies geographically overlapping assets and the potential for $15 million in cost synergies in the first year, pledging that Whitecap will increase its monthly dividend by six per cent to 1.508 cents per share after close.
Whitecap says its average production will be about 82,000 boe/d with a capital budget of about $260 million if the NAL deal is closed, but it will grow to about 100,000 boe and a budget of about $290 million if the TORC acquisition is completed.
“Despite the challenging conditions and significant volatility throughout the year, we have become an even stronger and more resilient energy producer entering 2021 with the combination with TORC as well as the NAL transaction announced on August 31, 2020,” said Fagerheim in a statement.
Whitecap said the Canada Pension Plan Investment Board has committed to vote its TORC shares in favour of the transaction.
Analyst Chris MacCulloch of Desjardins pointed out CPPIB stands to own about six per cent of Whitecap if the deal is completed, while NAL owner Manulife Financial Corp. will end up with about 10 per cent of the shares.
This report by The Canadian Press was first published Dec. 9, 2020.
Companies in this story: (TSX:WCP, TSX:TOG)
The Canadian Press