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Baytex Energy Group and has entered into a definitive agreement to acquire Eagle Ford E&P Ranger Oil Corp. for about $2.5 billion in cash and stock, including the assumption of debt, the companies said Feb. 28.

The deal is the latest Eagle Ford transaction following months of multi-billion dollar M&A by Marathon Oil, Devon Energy and, most recently, Chesapeake Energy.

Under the terms of the agreement, Ranger shareholders will receive a fixed ratio of 7.49 shares of Canada’s Baytex and $13.31 in cash for each Ranger share. Upon closing, Baytex shareholders would own approximately 63% of the combined company and Ranger shareholders will own approximately 37%.

The transactions are expected to close in the second quarter of 2023.

Eric T. Greager, president and CEO of Baytex, called the Ranger acquisition “strategic” and said it would more than double the company’s EBITDA and nearly double its free cash flow.

Ranger Oil’s inventory competes for capital within Baytex’s portfolio offers the potential for up to 15 years of oil-weighted drilling locations.

Ranger Oil’s assets additionally add Eagle Ford scale for Baytex, which has a non-operated position in the Karnes Trough.

The transaction includes 162,000 net acres in the crude oil window of the Eagle Ford shale, highly concentrated in Gonzales, Lavaca, Fayette and Dewitt counties, Texas. Baytex said the deal adds 67,000 boe/d to 70,000 boe/d (72% light oil, 15% NGLs and 13% natural gas).

The transaction also augments the company’s proved reserves will also increase by 174 MMboe.

Baytex to Acquire Eagle Ford E&P Ranger Oil for $2.5 Billion
Ranger Oil's Eagle Ford assets as of November. (Source: Ranger Oil investor presentation)

“We are acquiring a strong operating capability in the Eagle Ford, on-trend with our non-operated position in the Karnes Trough and driving meaningful per-share accretion on all metrics,” Greager said. “We are building quality scale and a more durable business with a lower breakeven WTI price.”

Darrin Henke, president and CEO of Ranger said he expects that “combining with the balance sheet strength, deep asset base, and operational excellence of Baytex will create a unique company of scale which will deliver sustained free cash flow growth and differentiated shareholder returns.”

“We look forward to bringing together our complementary teams and assets to realize the long-term value of this combination for our shareholders,” he said.

CIBC Capital Markets and RBC Capital Markets are acting as financial advisers to Baytex. CIBC Capital Markets has also provided a verbal opinion to Baytex’s Board of Directors to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications set forth therein, the consideration to be paid by Baytex, pursuant to the

Scotiabank is acting as strategic adviser to Baytex. Vinson & Elkins LLP and Burnet, Duckworth & Palmer LLP are serving as Baytex’s legal counsel. BofA Securities Inc. and Wells Fargo Securities LLC are acting as financial advisers to Ranger.

Kirkland & Ellis LLP is serving as Ranger’s legal counsel and Stikeman Elliott LLP is serving as Ranger’s Canadian legal counsel.