Vermilion acquires Saskatchewan’s Spartan Energy for $1.23 bln

Vermilion Energy said it has agreed to acquire rival oil and gas producer Spartan Energy for C$1.23 billion (US$97.8 million), expanding its presence in Saskatchewan, Canada.

The deal will see Alberta-headquartered Vermillion acquire all the common shares of the Saskatchewan company.  Spartan holders will get 0.1476 of a Vermilion share for each Spartan share, Vermilion said in statement.

This represents a premium of 5 percent, based on Friday’s closing prices. Vermilion also will assume about C$175 million of debt. The company expects the transaction to close on or about June 15.

Vermilion has focused on the Saskatchewan market in recent years, starting with the acquisition of Elkhorn Resources in 2014 and has been looking actively to expand its footprint in the province.

“Vermillion focuses on high-netback producing areas with favourable fiscal and regulatory regimes,” the company said. It has added approximately 30 sections of land to its southeast Saskatchewan core area through the end of 2017, and has expanded its asset base with the acquisition of a private southeast Saskatchewan oil producer in early 2018.

“The acquisition of Spartan is a value-adding investment which meets our disciplined M&A criteria. The acquisition significantly increases our position in southeast Saskatchewan, and aligns with our sustainable growth-and-income model by appending high-netback, low decline assets with free cash flow and strong capital efficiencies on future development,” it added.

As a result of the acquisition, the company revised its 2018 production guideline to a range of 86,000 to 90,000 barrels of oil equivalent per day (boe/d) (from 75,000 to 77,500 boe/d previously).

It also increased its 2018 capital budget to $430 million (from $325 million previously) to reflect additional capital activity associated with the acquired assets.