Word to the Wise: M&A Snapshot – Spartan Delta Corp. and Velvet Energy Ltd.

August 10, 2021

Each week, XI Technologies scans its unique combination of enhanced industry data to provide trends and insights that have value for professionals doing business in the WCSB. If you’d like to receive our Wednesday Word to the Wise in your inbox, subscribe here

M&A announcements continue to dominate the headlines in the oil and gas industry with 6 more announced in July alone. As the premier tool for scoping and evaluating corporate and asset A&D opportunities, we are pleased to offer some high-level summaries of a recent purchase of Velvet Energy Ltd. (Velvet) by Spartan Delta Corp (Spartan Delta).

What do the companies look like prior to completing the agreement? What do we know about each company’s assets, core areas, and recent activity? How might this combination affect others in the area? We’ve looked at both companies through a few different lenses to allow you to compare the companies and gain some insight of your own.

Figure 1 – Spartan Delta & Velvet production: Gas/Oil Ratio & top areas of production

Click here to download a pdf report of the above data, including land and historical data.

Core Areas

The announcement release mentioned the acquisition’s importance in the Montney region, which we previously discussed in our Montney Overview article back in March, as well as Velvet’s Oil weighted production.

Figure 2 – A map of Spartan Delta and Velvet’s pre-merger assets.

As there is some direct overlap of two companies’ asset positions, it is clear how the Velvet production will augment the current Spartan Delta Montney production moving them into the top 20 producers in this zone. See the heat map below of their combined assets for more details.

Figure 3 – Heat map of the combined assets.

Looking at the map of the top ten fields producing Montney hydrocarbons, you can see that the new combined Spartan Delta snuggles in amongst the Elmworth and Karr production.

Figure 4- The Montney mapped by field.

Looking at XI’s Merger Book, we can quickly see where the assets fall below a percentage that would be considered core to the company. A company in the market to pick up assets could approach Spartan Delta to see if they were looking to divest these assets rather than manage them outside of their true core interests.

Figure 5 – Spartan Delta and Velvet Merger Report

Click here to download the Merger Book report from AssetBook.

Once high-level scoping identifies assets of interest, it’s prudent to dig into the next level of evaluation and examine things like associated liabilities and emissions scoping. AssetSuite provides users the tools they need for this analysis with ARO Manager, which provides a true over the fence look at any grouping of assets to assess the potential end of life liability, and our upcoming Emissions module, which allows for A&D evaluations of Scope 1 Emissions for facilities in AB, SK, and BC.  If you’d like to learn more about how XI’s AssetSuite software can analyze potential mergers and acquisitions, contact XI Technologies.