Page 13 - NorthAmOil Week 49

NorthAmOil INVESTMENT NorthAmOil

Whitecap buying Torc in $442mn deal

WESTERN CANADA’S Whitecap Resources announced owing to a “moderated” capital programme, rep-
CANADA this week that it had struck a deal to acquire Torc resenting an output decline rate of less than 19%.
Oil & Gas in an all-stock deal valued at around The companies are aiming to lower production
CAD565mn ($442mn). Including Torc’s esti- in an effort to bolster the combined entity’s ability
mated net debt of CAD335mn ($262mn), the to generate significant free funds flow to increase
transaction is worth CAD900mn ($704mn). returns to shareholders. They said the combined
Under the deal, Torc shareholders will receive entity was anticipated to have over CAD300mn
0.57 Whitecap shares in exchange for each Torc ($235mn) of free funds flow, supported by a base
share, representing a discount of about 4.3% to production decline rate of roughly 17%.
the last closing price of Torc shares before the This would be a higher rate of free funds flow
acquisition was announced on December 8. than Whitecap expected to be able to achieve
The companies said in a statement that the alone, supporting a 6% increase in the monthly
transaction would create one of the largest pure dividend from CAD0.01425 ($0.01115) per
play conventional light oil producers in Canada. share to CAD0.01508 ($0.01180) per share from
The combined entity will have over 100,000 bar- March 2021.
rels of oil equivalent per day (boepd) of output, The deal comes as consolidation picks up
with oil and natural gas liquids (NGLs) account- pace in both Canada and the US, with merging
ing for 78% of this. They noted that the deal producers favouring all-stock transactions as
would also boost Whitecap’s dominance in its they pursue greater scale in an effort to boost
core operational area in Alberta and Saskatche- their performance in a difficult market. Indeed,
wan, as Torc’s asset base fits directly into it. Whitecap is also buying NAL Resources, with
The two companies added that Torc’s current that transaction anticipated to close in January,
production is around 25,000 boepd, and that this while the Torc takeover is expected to close by
is anticipated to drop to 22,000 boepd in 2021 February 25, 2021.™

Newfoundland and Labrador government

offers lifeline to West White Rose

NEWFOUNDLAND THE government of the Canadian province schedule and cost of West White Rose.
AND LABRADOR of Newfoundland and Labrador announced Further uncertainty followed in October, on
last week that it would provide CAD41.5mn news that Husky was being taken over by Ceno-
($32.4mn) worth of funding for Husky Energy’s vus Energy. A day after that announcement,
stalled West White Rose project. The offshore Husky confirmed that construction on the pro-
project becomes the first to be funded under the ject would not resume in 2021, and that further
Oil and Gas Industry Recovery Assistance Fund, work to review the project would be needed after
which was set up to offer support to operators the Cenovus acquisition closes in the first quar-
battered by low oil prices and the coronavirus ter of next year.
Husky suspended (COVID-19) pandemic. Cenovus commented in October, saying that
construction on In a December 3 statement, the Newfound- West White Rose was key to extending the life
infrastructure for West land and Labrador government said the funding of the White Rose field, but that all options –
White Rose in March for West White Rose equated to 50% of total pro- including accelerated abandonment – remained
amid the first wave of ject costs. It will be used to maintain jobs in the on the table.
COVID-19 in Canada. nearer term as well as to allow for the option of The injection of provincial cash into West
restarting work on the project in 2022 if market White Rose is expected to help maintain 331 jobs
conditions are favourable. in Newfoundland and Labrador, with Husky
This comes after Husky suspended con- set to match the Newfoundland and Labrador
struction on infrastructure for West White government’s funding. However, a day after the
Rose in March amid the first wave of COVID- funding was announced, dozens of workers at
19 in Canada. The company subsequently the West White Rose construction site in Argen-
re-prioritised its capital expenditure budget tia received layoff notices, according to CBC
owing to the oil industry downturn, saying News. Meanwhile, the workforce at a related site
in September that it would review the scope, in Marystown is reported to be growing.™

Week 49 10•December•2020 www. NEWSBASE .com P13