Twin Butte Energy Completes $385 Million Aquisition Of Black Shire

Transaction Type
Sellers
Buyers
Announce Date
Post Date
Close Date
Estimated Price
CA$358.0MM
Description

Acquired the Canadian oil and gas company with a focused asset base in the greater Provost area.

Twin Butte Energy Ltd. (TO: TBE) completed the acquisition of Black Shire Energy Inc. pursuant to a plan of arrangement under the Business Corporations Act ( Alberta ) for $358 million, the company announced Nov. 5.

The final transaction price included the assumption of $107.6 million of net debt. Total cash of $138 million was allocated to former Black Shire shareholders along with the issuance of some 54 million common shares to acquire all of the outstanding securities of Black Shire. After giving effect to the acquisition and the conversion of all of the subscription receipts, some 342.1 million common shares of Twin Butte are outstanding.

Black Shire, which was amalgamated with Twin Butte following the completion of the acquisition, was a private company with a focused asset base in the greater Provost area, producing 7,000 barrels of oil equivalent per day (BOE/d) with 93% medium gravity oil. The greater Provost area is directly adjacent to Twin Butte's core Lloydminster heavy oil area. Black Shire was an attractive acquisition for Twin Butte in that it has demonstrated its ability to generate substantial free cash flow while developing its large and low risk horizontal drilling inventory, providing growth in production and reserves. Twin Butte thinks that the acquisition strategically supports Twin Butte's dividend model and enhances the company's long term dividend sustainability.

The acquisition is accretive to Twin Butte on all key metrics, especially cash flow per share. The acquisition is consistent with Twin Butte's historic strategy of acquiring quality long life assets, with large resource potential within focus areas where Twin Butte has expertise. Twin Butte's strategy of providing shareholders with long term total returns comprised of both income and moderate growth is expected to be strengthened through the acquisition by:

  • Reducing Twin Butte's anticipated annual production decline rate from 29% to 26%;
  • Enhancing Twin Butte's netback from current levels of $22 to $27 per BOE; and
  • Increasing Twin Butte's liquids production weighting from 88% to 91%.

The acquisition was partially funded through a bought deal public financing through a syndicate of underwriters led by Peters & Co. Ltd. Pursuant to the offering, Twin Butte issued some 36 million subscription receipts at $1.95 per subscription receipt for gross proceeds of $70 million. In accordance with their terms, each subscription receipt was exchanged for one common share of the company upon the closing of the acquisition and the proceeds from the sale of the subscription receipts were released from escrow. Holders of subscription receipts are not required to take any action in order to receive the common shares to which they are entitled.

The company's combined production is now 23,200 BOE/d with 91% oil and liquids, with net debt estimated at $367 million or 1.7 times Twin Butte's estimated 2014 cash flow, on an increased $400 million credit facility.

Twin Butte Energy Ltd. is an independent energy company engaged in the acquisition, exploration, development, and production of petroleum and natural gas properties in Western Canada. The company is headquartered in Calgary.