Strathcona Assets Ltd. stated it has entered into definitive agreements to divest “considerably all of its Montney belongings” for about CAD 2.84 billion ($2.04 billion), because it prepares to make a hostile bid to take over fellow Canadian thermal oil producer MEG Power Corp.
The Montney exit and the deliberate merger with MEG will permit Strathcona to turn into a pure-play heavy oil producer, it stated.
The majority of the Montney sale consists of Strathcona’s Kakwa enterprise, to be acquired by ARC Assets Ltd. for round CAD 1.7 billion. The transaction worth contains CAD1.65 billion in money and roughly CAD 45 million in assumed lease obligations. The sale is anticipated to be accomplished within the third quarter, topic to regulatory approvals and different customary circumstances.
- Advertisement -
Strathcona can be promoting its Grande Prairie enterprise for about CAD 850 million, inclusive of about CAD 100 million in assumed lease obligations, to an unnamed purchaser. The sale can be anticipated to shut subsequent quarter.
The Groundbirch enterprise rounds up the Montney gross sales. It’ll go to Tourmaline Oil Corp. in trade for CAD 291.5 million value of shares being issued to Strathcona. The events anticipate to conclude the transaction by June.
The Monetney tendencies produced 72,000 barrels of oil equal a day (boed), 28 p.c of which have been oil and condensates, final 12 months. That they had confirmed and possible reserves of 635 million boe as of December 2024, in accordance with Strathcona.
“Taken collectively, the disposed belongings generated CAD 149 million of working earnings in 2024 (12 p.c of complete Strathcona year-end 2024 working earnings, excluding curiosity and different company gadgets) and had a YE 2024 proved PV-10 before-tax of roughly CAD 2.3 billion (15 p.c of complete Strathcona YE 2024 proved PV-10), whereas the mixed sale value represents roughly 33 p.c of Strathcona’s present enterprise worth”, it stated in a web-based assertion.
MEG Bid
In a separate assertion Strathcona stated it intends to supply to accumulate all MEG shares it doesn’t already personal, regardless of the latter’s board rejecting the proposal. “Strathcona believes the advantages of a mix of Strathcona and MEG are vital sufficient that MEG Shareholders ought to have the chance to resolve for themselves”, Strathcona stated.
Strathcona acquired about 23.4 million MEG shares by means of open market purchases this 12 months. These represented about 9.2 p.c of issued and excellent MEG shares as of Could 5, Strathcona stated.
MEG shareholders will likely be supplied 0.62 frequent shares in Strathcona plus CAD 4.1 for every share they personal at MEG.
“Primarily based on the closing share value of the Strathcona Shares on the Toronto Inventory Trade (the ‘TSX’) on Could 15, 2025, the Provide represents complete consideration of CAD 23.27 per MEG Share (82.4 p.c Strathcona Shares and 17.6 p.c money), reflecting a 9.3 p.c premium primarily based on the closing value of the MEG Shares on the TSX on Could 15, 2025”, Strathcona stated.
Along with the deliberate supply, Strathcona’s majority shareholder, Waterous Power Fund (WEF), intends to subscribe to a further 21.4 million Strathcona shares by means of WEF III.
Present Strathcona shareholders are anticipated to personal 56.5 p.c of the mixed enterprise, whereas current MEG shareholders would maintain 37.8 p.c. Inclusive of its current Strathcona shares plus these anticipated to be issued to WEF III, WEF’s shareholding within the merged firm could be 51 p.c, Strathcona stated.
“The mixture of Strathcona and MEG would unify two 100+ Mbbls/d [over 100,000 bpd] heavy oil ‘pure performs’ with close to an identical netbacks and reserve life indexes, each targeted on SAGD [steam-assisted gravity drainage] oil sands growth”, Strathcona stated. “The mixture would create Canada’s fifth largest oil producer and fourth largest SAGD producer, with among the many largest proved oil reserves in North America”.
“Strathcona has recognized CAD 175 million in annual synergy alternatives, together with CAD 50 million in overhead discount alternatives, CAD 25 million in curiosity financial savings alternatives and CAD 100 million in working synergy alternatives (CAD 75 million in capital expenditures and CAD 25 million in working prices)”, it added.
MEG responded in an announcement on its web site that its board would “take into account and consider the Strathcona supply and associated take-over bid round, if and when acquired”.
“No formal supply has been made by Strathcona and MEG shareholders are suggested to take no motion with respect to any Strathcona supply till the Board has had a possibility to completely assessment the supply, if and when acquired, and to make a suggestion as to its deserves”, MEG added.
The Strathcona assertion stated it “stays prepared and keen to have interaction with the MEG Board concerning a strategic mixture”.
“To the extent the MEG Board determines it to be prudent, because the second largest MEG Shareholder, Strathcona would additionally help a strategic alternate options course of for MEG to find out if a superior transaction is accessible”, Strathcona stated.
Hardisty Rail Terminal Acquisition
Strathcona additionally introduced it had accomplished the acquisition of the Hardisty Rail Terminal (HRT), which has a capability of 262,000 bpd and a year-to-date throughput of about 50,000 bpd, for CAD 45 million.
“Along with Strathcona’s Hamlin Terminal, Strathcona now owns and operates rail terminals servicing roughly 80 p.c of the full present crude-by-rail volumes in western Canada, permitting for significant economies of scale”, the corporate stated.
“The HRT acquisition is a continuation of Strathcona’s countercyclical acquisition technique targeted on core space consolidation.
“Whereas HRT is simply 19 p.c utilized as we speak, it has been as much as 82 p.c utilized traditionally during times of tight pipeline egress, offering Strathcona with a pure hedge towards future egress bottlenecks”.
Dividend Enhance
Strathcona raised its quarterly dividend by 15 p.c in comparison with the primary quarter of 2025 to CAD 0.3 per share. The rise partially displays an upward revision in manufacturing steering for 2025, normalized for the Montney divestments. Strathcona now expects 2025 manufacturing to common 150,000-160,000 boed.
Within the January-March 2025 interval Strathcona produced about 194,600 boed, up 4 p.c towards the prior three-month interval pushed by file manufacturing of 65,000 bpd at Chilly Lake. Oil output was almost 136,200 bpd, whereas pure gasoline averaged 279.52 million cubic toes a day.
Strathcona logged file quarterly working earnings of CAD 322 million. Increased manufacturing and realized costs, in addition to decrease royalties, greater than offset a stagnation in oil costs, it stated.
To contact the creator, e mail jov.onsat@rigzone.com
