ARC Resources Ltd. and Seven Generations Energy Ltd. have agreed to merge in an all-share transaction valued at $8.1 billion (Can.), inclusive of net debt. The combine, ARC Resources Ltd., will be the largest pure-play Montney producer and Canada's largest condensate producer, the companies said in a joint press release Feb. 10.
The combined company will hold over 1.1 million net acres in the Montney and an inventory of high-return, de-risked core development opportunities, the companies said. Production from the combine in 2021 is expected to total over 340,000 boe/d, comprising 138,000 b/d of liquids and 1.2 bcfd of natural gas. Preliminary pro forma 2021 outlook estimates capital investments of $1-1.1 billion (Can.), which will primarily be focused on sustaining production at core operating properties. Some 60% of production is expected to come from Alberta, where the company plans to spend $650 million (Can.) on the Nest (Seven Generations’ primary development region) with the remaining 40% being produced in British Columbia where $315 million (Can.) is being allocated to sustain production and complete two small-scale infrastructure projects at Sunrise and Parkland-Tower (OGJ Online, July 8, 2016).
Estimated cost savings and synergies are expected to drive $110 million (Can.) in annual free funds flow improvements by 2022, attained through corporate cost savings, operating efficiencies, market optimization opportunities, and drilling and completions efficiencies, the companies said.
The company will be led by ARC's Terry Anderson as president and chief executive officer and director, ARC's Kris Bibby as senior vice-president and chief financial officer, and Seven Generations' David Holt as senior vice-president and chief operating officer. ARC's Hal Kvisle will serve as board chair and Seven Generations' Marty Proctor will become board vice-chair. The board will consist of 11 members, made up of six directors from ARC and five directors from Seven Generations.
The company will be headquartered in Calgary, Alta., with field operations in Grande Prairie, Alta., Dawson Creek, BC, and Drayton Valley, Alta.
In connection with the deal, RBC Capital Markets and CIBC Capital Markets, acting as joint bookrunners, will provide underwritten aggregate credit facility commitments of up to $3.5 billion (Can.).
Seven Generations shareholders will receive 1.108 common shares of ARC for each common share of Seven Generations held. Following the deal’s close—expected in this year’s second quarter subject to shareholder approval, regulatory approvals, and other closing conditions—ARC shareholders will own 49% and Seven Generations shareholders will own 51% of total shares outstanding.
