Page 14 - NorthAmOil Week 32

NorthAmOil INVESTMENT NorthAmOil

CNRL to acquire debt-laden Painted Pony

WESTERN CANADIAN Natural Resources Ltd (CNRL)
CANADA announced this week that it had agreed to
acquire Painted Pony Energy for CAD461mn
($347mn) including debt. Indeed, the assump-
tion of Painted Pony’s debt makes up the major-
ity of the transaction at CAD350mn ($264mn),
while CNRL will pay CAD111mn ($84mn)
in cash for the company. This works out as
CAD$0.69 ($0.52) per share.
The deal comes after a quiet period for North
American mergers and acquisitions (M&As),
at least until Chevron announced its takeover
of Noble Energy last month. Now, with crude
prices relatively stable for several weeks and
many countries easing lockdowns related to
the coronavirus (COVID-19) pandemic, larger
North American companies appear to be gain-
ing the confidence to make acquisitions.
CNRL is one of Canada’s largest producers,
and the deal illustrates its desire to keep grow-
ing its footprint in the liquids-rich Montney
shale gas play in northeastern British Columbia.
The company said in an August 10 statement
that Painted Pony’s acreage and production are
located within its own core area. As a result,
CNRL expects the transaction to provide it with
an opportunity to leverage synergies relating to
pre-built infrastructure and transportation.
The acreage being acquired currently yields
roughly 270mn cubic feet (7.6mn cubic metres)
per day of gas and 4,600 barrels per day (bpd) of
natural gas liquids (NGLs).
“This acquisition further strengthens Cana- reporting a better-than-expected loss for the sec- Painted Pony’s Montney
dian Natural’s natural gas assets and production ond quarter of 2020. The company’s adjusted loss acreage and production
base in key operating areas and complements the came in at CAD772mn ($581mn), or CAD0.65 are located within
company’s diversified portfolio,” CNRL’s pres- ($0.49) per share, while Refinitiv data showed CNRL’s own core area
ident, Tim MacKay, stated. “This transaction that analysts had expected it to post an adjusted in the play.
also allows us to further insulate against natural loss of CAD0.85 ($0.64) per share. This com-
gas costs in our oils sands operations and has pares with an adjusted profit of CAD1.04bn
News of the minimal impact on the company’s low overall ($783mn), or CAD0.87 ($0.66) per share, in the
corporate decline rate.”
second quarter of 2019.
deal comes CNRL also noted that transaction value CNRL said it produced 1.16mn barrels of oil
within days of represented roughly 1% of its total enterprise equivalent per day (boepd) in the second quar-
value and was therefore not anticipated to have ter of this year, including about 922,000 bpd of
CNRL reporting a material impact on its balance sheet strength crude and NGLs. Despite voluntary curtailments
or liquidity position. Given the wariness that has introduced in the wake of the oil price collapse
a better-than- surrounded M&As recently, it comes as no sur- in March, the company’s output rose year on year
prise that the company would seek to reassure from 1.02mn boepd, including 770,000 bpd of
expected loss investors about the wisdom of making an acqui- crude and NGLs, in the same quarter of 2019.

for the second sition in the current market. CNRL noted that in response to improving
In its own statement, Painted Pony said that commodity prices, it had brought all of its volun-
quarter of 2020. it had been struggling with cash flow owing to tarily curtailed production back online in June.
three years of low natural gas prices, as well as The company said it had achieved record quar-
the more recent decline in NGL prices, among terly production of synthetic crude oil (SCO)
other factors. The company therefore initiated a amounting to around 464,300 bpd inclusive of
confidential process to explore “opportunities to planned maintenance at the Horizon project in
enhance shareholder value”. Once this process May. It also reported record low oil sands min-
had been completed, Painted Pony’s board con- ing and upgrading operating costs of $12.80 per
cluded that this transaction represented the best barrel during the second quarter. This marked a
alternative for the company’s shareholders under 15% decrease from the first quarter, which the
current circumstances. company attributed to continuing to focus on
News of the deal comes within days of CNRL cost control.™

P14 www. NEWSBASE .com Week 32 13•August•2020