Canadian natural gas producer Tourmaline Oil has agreed to acquire a 100% stake in Bonavista Energy Corporation in a cash and stock deal worth C$1.45bn ($1.06bn).

Privately held natural gas producer Bonavista owns assets including existing 2P (proved and probable) reserves of 459 million barrels of oil equivalent (boe) as of 1 October 2023, 1.2 million net acres of land rights and 839 gross (656.7 net) horizontal internally estimated drilling locations.

Under the definitive agreement, Tourmaline Oil will acquire all the shares of Bonavista by issuing $725m in Tourmaline common shares and $725m in cash, less net debt of Bonavista at closing of the transaction.

The acquisition is expected to strengthen Tourmaline Oil’s position in Western Canada’s Deep Basin.

In a press statement, Tourmaline Oil said: “The Acquisition represents a further important component of the Company’s ongoing consolidation strategy that complements its long-term EP organic growth plan, adding decades of inventory and supplementing Tourmaline’s existing Deep Basin assets. 

“The Bonavista assets are a natural extension of Tourmaline’s existing operations in the Deep Basin where the Company is already the largest producer.” 

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By GlobalData

Tourmaline said the deal will immediately add to its 2024 free cash flow and generate around C$450m of net operating income per year in 2024 through 2026.

Subject to customary regulatory and stock exchange approvals, the transaction is due to be closed in the second half of November 2023.

Upon completion of the deal, Tourmaline’s production is expected to increase to 600,000boed.

Peters & Co. is served as Tourmaline’s financial advisor. TPH&Co, the energy business of Perella Weinberg Partners, acted as Bonavista’s financial advisor.

Furthermore, Tourmaline announced plans to increase its quarterly base dividend from $1.04 per share to $1.12 per share on an annualised basis. This is effective in the fourth quarter of 2023.

The board of Tourmaline also declared $1.00 per share in a special dividend.