Painted Pony Petroleum has entered a share purchase agreement to acquire all issued and outstanding shares of UGR Blair Creek (UGR), a fully owned subsidiary of Unconventional Resources Canada, a portfolio investment held in certain private equity funds advised by ARC Financial and EnCap Investments.
UGR operates high working-interest Montney assets located adjacent to Painted Pony's assets in north-east British Columbia, Canada.
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Under the agreement, Painted Pony will issue 41 million common shares to URC. Carrying a price of $5.60 per share, the total cost for this acquisition will be $229.6m.
After the transaction closes, Painted Pony will assume UGR's net debt of $47m, as of 31 December 2016.
It will also assume other expected transaction costs of ARC, EnCap, URC and UGR.
Painted Pony president and CEO Pat Ward said: “As partners and neighbours, UGR's assets fit like a glove with our existing asset base.
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By GlobalData“While the acquired under-utilised processing capacity and transportation service will facilitate prudent growth in production and cash flow in the near term, Painted Pony's significantly lower drilling and completion costs relative to UGR will generate material synergies and accretion as we execute our business plan on an expanded land base.
“Several of our most prolific Montney wells have been drilled on lands adjacent to or on jointly held UGR lands.
“This acquisition is consistent with our long-term strategy of cost-effective, counter-cyclical growth.”
The acquisition expands Painted Pony's Montney land position by 52% to 314 net sections or 201,009 net acres with an average 94% working interest.
The acquisition comprises 197 net 2P drilling locations as the company’s management estimates more than 1,000 additional unbooked drilling locations on UGR lands.
The transaction also increases Painted Pony's 2P reserves by 39% or 2.0 trillion cubic feet equivalent (tcfe) (325.1 million barrels of oil equivalent) and 1P reserves by 29% or 768bcfe (128mmboe).
The acquisition is subject to multiple customary conditions and expected to close by 16 May this year.
Furthermore, Painted Pony has entered an agreement with a syndicate of underwriters led by Cormark Securities and TD Securities, under which the underwriters will buy, on a bought-deal basis, 18 million Painted Pony shares at a price of $5.60 per share.
Painted Pony expects to raise nearly $100.9m through this transaction.
The company intends to use a part of the proceeds to fund drilling on the acquired assets and other Painted Pony properties.
The remaining amount will be used to pay to reduce bank indebtedness and other corporate purposes.
