November 7, 2023
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The merger and acquisition space in oil and gas has become heated again with multiple deals announced every month. During this exciting time, finding deals that are not is critical to being competitive. That’s where XI comes in. Our role in providing data and software tools that help evaluate deals long in advance. Today, our M&A snapshot after-the-fact provides insights for your own evaluations that can be done without a data room and/or for finding “one-off deals.”
Let’s look at one of the more recent transactions announced on October 31, 2023: Pine Cliff Energy Ltd. (Pine Cliff) purchased the outstanding common shares of privately held junior, Certus Oil and Gas Inc. (Certus).
When assessing this transaction through different lenses using AssetSuite software tools, we are able to see each company’s asset profile, plus the combined entity, to gain valuable insight into the transaction beyond announced high-level acquisition highlights.
Pine Cliff contributes 79% of the production to the combined entity. The companies are relatively similar in terms of operatorship (licensee on file) in that both have a high percentage operatorship, with Pine Cliff at 89% and Certus at 92%. Both companies also have a number of partners, with Pine Cliff having approximately 66% working interest of their BOE’s and Certus at 63%.
Figure 1 – Working Interest values for Pine Cliff (blue) and Certus (red). Source: AssetBook.
While the absolute numbers tell one story, accretion and dilution metrics tell us more. Looking at the AssetSuite summary, we can calculate some accretion and dilution metrics for this transaction relative to the increase in production.
Per Figure 2 below, this deal is largely accretive. Pine Cliff’s production base grew by 26%, operatorship by 1% with only BOE working interest decreasing by 1%.
Figure 2: Deal Metrics. Above numbers are based on three-month average to August production with raw gas numbers at a 6:1 gas to oil conversion. Source: AssetBook and ARO Manager.
As we can see, the contribution of inactive licenses did have a net negative effect but by a minimal amount compared to the increase in boe/day and average well productivity.
Pine Cliff mentions this transaction expands their core operations into the Caroline area of Western-Central Alberta.
Figure 3 – Map of Pine Cliff and Certus Assets. Source: AssetBook.
Pine Cliff is very spread out over the Western Canadian Sedimentary Basin so this acquisition is an expansion into a new area instead of a consolidation of Core, as evidenced from the map above. Pine Cliff is primarily a gas company with just under 97% of their production from gas. Pre-deal, the bulk of their production came from the government-defined fields of Twining and Viking Kinsella. Post-deal, these are still core to Pine Cliff, but the production does move over more fields:.
Figure 4 – Pine Cliff production by field before and after deal. Source: AssetBook.
With the AssetBook we can create an area around the Certus assets to see all other players that may be affected by this deal. Whitecap Resources Inc. (Whitecap) is the largest player in this area with approximately 35,000 boe/d of production. This area makes up 15% of Whitecap’s production. Notably, this area makes up 85% of Vesta Energy Ltd’s (Vesta) production falling in the top 10 producers of this area with approximately 13,000 boe/d. There are 92 companies with ten or more boe/day in this area.
Download more information on these 92 companies in this area here.
Figure 5 – Top 10 companies in Core Area. Source: AssetBook.
Using an LLR analysis, this deal is slightly accretive to Pine Cliff’s LLR ratio. According to AssetBook’s LLR Module (which only accounts for licensed assets), Pine Cliff will absorb $131,868,545 in deemed liabilities, all from Alberta.
Figure 6 – LLR for Pine Cliff, pre- and post-transaction. Source: AssetBook LLR Module.
While analyzing deals after they are announced is interesting, tools that provide the leg up for looking at your own deals or finding deals proactively to create better value provide a significant advantage. For more results on this acquisition, or to learn more about how XI’s AssetSuite software can analyze potential mergers, acquisitions, and opportunities, including examining potential liabilities and emissions, click here.
Discover how XI’s AssetSuite and ARO Manager can help with the planning and reporting of liability management: contact XI for a demo.