Canadian oil and gas firm Baytex Energy has reached a C$2.8bn ($2.1bn) merger agreement with Raging River Exploration to form a company with significant East Duvernay Shale operations in Alberta.
With an enterprise value of C$5bn ($3.76bn), the combined entity is set to become a well-capitalised, oil-weighted company with a strong growth and free cash flow generation and a greater ability to develop oil assets across North America.
While the deal will provide Baytex access to East Duvernay Shale oil activity, Raging River will have increased scale to advance its East Duvernay Shale operations.
Under the terms of the agreement, Baytex will issue 1.36 common shares to Raging River shareholders for each share they own in the company.
The new entity will operate under the Baytex name and have an asset base that includes the Viking, Peace River, Lloydminster and East Duvernay Shale regions in Canada, as well as the Eagle Ford region in Texas.
The companies expect the combined entity to have average annual production of 100,000 to 105,000boe/d for 2019, with total exploration and development expenditures ranging between C$750m and C$850m ($564.04m-$639.25m).
Raging River Exploration executive chairman and CEO Neil Roszell said: “This combination creates a diversified, well-capitalised oil producer that has an impressive suite of high-quality producing assets and the ability to materially advance our East Duvernay Shale light oil opportunity, while continuing to develop our Eagle Ford, Viking, Peace River and Lloydminster core assets.”
With a 260,000 net acre position in the emerging East Duvernay Shale oil play, the new company will have proved and proved plus probable reserves, totalling 338mmboe and 539mmboe respectively.
Subject to approval by the shareholders of both companies and other regulatory approvals, the merger is scheduled to be completed in August.
