Vermilion to acquire Montney assets from Leucrotta Exploration

Vermilion Energy Inc., Calgary, has agreed to acquire Montney-focused Leucrotta Exploration Inc. for a net cash purchase price of $477 million in a deal that adds scalable, Tier 1 inventory, the company said in a Mar. 28 release.

Leucrotta holds oil and natural gas assets in the Mica area of Northeast British Columbia and Northwest Alberta. The property comprises 81,000 gross (77,000 net) contiguous acres of Montney mineral rights in the Peace River Arch straddling the Alberta and British Columbia borders.

In 2023, the assets to be acquired are expected to produce about 13,000 boe/d, with anticipated capacity to grow to a sustainable plateau production base of 28,000 boe/d over the next few years, Vermillion said.

Assuming a second-half May 2022 closing date, Vermillion plans to invest $75 million for the remainder of 2022 in the assets which will include the drilling of a 6-well pad in Alberta and infrastructure development.

The longer-term development plan contemplates drilling to maintain the plateau production base over the next 20+ years.

As part of the deal, a portion of the Leucrotta land base and some $43.5 million in cash will be transferred to a new company (ExploreCo) which will be managed by the existing Leucrotta team. Vermilion will acquire a 12.5% equity stake in ExploreCo for about $14 million and obtain board representation and other customary investor rights.

Guidance

Vermilion is increasing its 2022 exploration and development capital budget to $500 million and increasing its annual production guidance to 86,000-88,000 boe/d to account for the Leucrotta acquisition, assuming a second-half May 2022 closing date.

With the execution of the planned Mica drilling program and the anticipated close of the Corrib acquisition in second-half 2022, the company expects to exit the year with corporate production of about 95,000-100,000 boe/d. In late 2021, Vermilion agreed to acquire Equinor subsidiary Equinor Energy Ireland Ltd., which owns a 36.5% interest in the Vermillion-operated Corrib gas project in Ireland, for $434 million. (OGJ Online, Nov. 29, 2022).

The revised guidance does not include any contribution from the Corrib acquisition. The company expects the transaction closing in this year’s second half.

The deal remains subject to certain closing conditions, including receipt of applicable court, Leucrotta shareholder and securityholder approvals, and other regulatory approvals.