More consolidation among E&P in Canada as one agreement is signed, another proposed

Strength in numbers emerged on Monday as a survival strategy in the face of falling fossil fuel prices and the Covid-19 pandemic among independent Canadian oil and gas companies as merger announcements and a second twinning proposal were made. done.

Whitecap Resources Inc. and NAL Resources Ltd. entered into a C $ 155 million ($ 116 million) corporate marriage deal, while Obsidian Energy Ltd. issued an offer to discuss the terms of a combination with Bonterra Energy Corp.

“Whitecap’s increased size and financial strength are expected to improve its credit profile and lower its cost of capital,” said the announcement of the agreement with NAL.

“The equity and debt consolidation capital markets have been sending a clear signal for more than two years that they no longer support small and mid-cap upstream energy producers,” Obsidian’s proposal told Bonterra .

No amount of money would change hands in exploration and production (E&P) mergers.

Whitecap plans to exchange 58.4 million common shares for all of the NAL shares, held as a private investment by Manulife Financial Corp. Combined production in 2021 is expected to be 81,000 to 83,000 boe / d.

Obsidian disclosed an initial offer to pay two common shares for each Bonterra share. Obsidian predicted the combination would have an oil and gas production equivalent of 35,000 boe / d.

Bonterra gave no immediate response to the public opening. Obsidian has revealed that it has made merger proposals without hearing a clear answer since June.

Bonterra recently announced an agreement for a loan of up to C $ 45 million ($ 34 million) under a Covid-19 emergency credit program offered to industry by the Business Development Bank of Canada of Canada. Canadian government.

“Engaging with Obsidian Energy is a much better result for Bonterra shareholders,” the public proposal said. “Adding more debt to an already over-leveraged balance sheet is a much lower result. ”

Whitecap-NAL’s E&P marriage and Obsidian court with Bonterra echoed an announcement earlier in August of a friendly C $ 111 million ($ 83.3 million) takeover of the gas producer. Montney Painted Pony Energy Ltd. shale by Canadian Natural Resources Ltd.

In combination with weak investment markets for E&P stocks, the severe declines in energy prices inflicted by the pandemic “deprived Painted Pony’s asset base of the capital necessary to finance significant development.”

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