Long Run is led by former Penn West Petroleum chairman Bill Andrew.Todd Korol/The Globe and Mail
Long Run Exploration Ltd. is buying Crocotta Energy Inc. in a $242-million all-stock deal that extends a recent flurry of acquisitions in the oil patch.
As part of the deal, Crocotta is spinning off its Montney liquids-rich gas assets as a new exploration company.
Long Run, which recently closed an acquisition of Alberta Deep Basin and Edson Pine Creek Cardium assets, said the deal will add production of 7,500 barrels of oil equivalent a day in the latter region. It now expects 2014 production of 32,100 barrels of oil equivalent a day and 2015 output of 43,200 barrels a day.
Under the arrangement, Crocotta shareholders will get 0.415 of a Long Run share for each of their own. Long Run will also assume $115-million of debt. Crocotta shareholders also receive one share in the new ExploreCo and 0.2 of an ExploreCo purchase warrant. Each full warrant is exercisable for an ExploreCo share for $1.70 on the close of the deal or up to 30 days after, Crocotta said.
In addition, Crocotta agreed with a syndicate led by National Bank Financial to raise $30-million for ExploreCo through the sale of subscription receipts on a bought-deal basis, it said.
Crocotta's Montney assets currently produce 2,300 barrels of oil equivalent a day. The new company will have $67-million in cash and no debt, it said.
For its part, Long Run, led by former Penn West Petroleum chairman Bill Andrew, said it is paying $43,600 per daily barrel of production. Proved plus probable reserves are pegged at 32.6 million barrels of oil equivalent.
Jeffrey Jones