PrairieSky Royalty Ltd. recently entered into a definitive agreement with Heritage Royalty to acquire over 1.9 million acres of royalty lands for total cash consideration of CA$728 million.
“With this acquisition, PrairieSky consolidates a complementary and historic asset base, one of the largest blocks of fee mineral title acreage in Canada, with our incomparable existing royalty portfolio,” President and CEO Andrew Phillips commented in a company release on Nov. 29.
The acquisition includes current estimated royalty production of 2,700 boe/d (92% liquids), from which PrairieSky said it expects to generate approximately $65 million of royalty revenue in 2022, excluding any leasing, compliance and other revenues associated with the royalty lands.
In addition to the royalty acreage throughout Alberta, Saskatchewan and Manitoba, PrairieSky picks up over 1.7 million net acres of fee simple mineral title lands and extensive seismic assets that are complementary to the royalty lands as a result of the transaction. In particular, the acquisition will reunify a preeminent fee simple mineral title asset across Alberta, Saskatchewan and western Manitoba with PrairieSky’s existing royalty portfolio of approximately 16.3 million acres, according to the release.
“The acquisition is highly accretive on a per-share basis and is consistent with our strategy of adding complementary royalty assets that provide near term cash flow accretion per-share along with near, medium and long-term value enhancement potential,” Phillips added of the acquisition in the release.
Including the proposed acquisition, PrairieSky has successfully added approximately 3 million acres of incremental royalty lands, predominantly fee mineral title, to its business in 2021, he noted.
PrairieSky plans to fund the proposed acquisition, expected to close in December, through a new CA$500 million term loan provided by TD Securities Inc., and a concurrent CA$200 million bought deal equity financing led by TD Securities and RBC Capital Markets as joint book-runners and co-led by CIBC Capital Markets and BMO Capital Markets on behalf of a syndicate of underwriters. The acquisition has an effective date of Dec. 31.
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