Page 9 - NorthAmOil Week 28 2021

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Penn Virginia to acquire Lonestar for $370mn

TEXAS PENN Virginia announced this week that it additional scale, and would also put it in a strong
had agreed to acquire Lonestar Resources US financial position to potentially pursue further
for $370mn in an all-stock transaction in Texas’ consolidation in the future.
Eagle Ford shale play. The move comes as the Both companies talked up the additional
US shale industry continues its consolidation in scale the deal is expected to provide in state-
pursuit of greater scale, among other goals. ments from their executives.
Under the terms of the agreement, Lonestar “This transaction further solidifies the com-
shareholders will receive 0.51 shares of common pany’s position as a premier Eagle Ford opera-
stock of Penn Virginia for each share of Lonestar tor and provides additional scale and synergies
common stock. The acquisition also includes while still delivering operational excellence,”
the assumption of around $236mn worth of said Penn Virginia’s president and CEO, Darrin Both companies
net debt. The purchase price represents a 17% Henke. “The benefits of basin consolidation are
premium to Lonestar’s closing price of $10 per very compelling, and we strongly believe this is a talked up the
share on July 9, according to KeyBanc analyst value-creating opportunity for both companies.
Leo Mariani. We remain steadfast in our disciplined approach additional
The transaction is expected to close in the to running the business and continue to be com-
second half of 2021 and has already been unan- mitted to free cash flow generation, capital dis- scale the deal
imously approved by the boards of directors of cipline, maximising cash-on-cash returns, and is expected
both companies, Penn Virginia said in a July 12 protecting the environment.”
statement. “In today’s environment, size and scale are to provide in
The acquisition is anticipated to complement paramount, both in terms of operations and
Penn Virginia’s existing assets, raising inventory in the public markets,” added Lonestar’s CEO, statements from
locations by 50% to 750 gross locations. Sales Frank Bracken. “The merger exposes Lonestar
volumes for 2021 and free cash flow (FCF) are shareholders to a substantially larger, more their executives.
also expected to be increased by around 50% as liquid, publicly listed platform and the com-
a result of the transaction. Penn Virginia also bination of the two companies’ high-quality,
anticipates that the deal will result in annual liquids-focused operations should provide sig-
synergies worth over $20mn. nificant benefit to both shareholder groups, posi-
The company currently produces roughly tioning the company as a dominant force in the
25,000 barrels of oil equivalent per day (boepd) Eagle Ford Shale.”
in the Eagle Ford, while Lonestar said this week Lonestar emerged from bankruptcy protec-
that its output had reached 12,750 boepd in June. tion in late 2020, having completed its financial
Penn Virginia said the acquisition would give it restructuring.™

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