Tourmaline Oil Corp. (TSX) has announced a significant strategic move with the acquisition of Crew Energy Inc. for approximately $1.3 billion. This acquisition strengthens Tourmaline’s position as a leading natural gas producer in Canada, adding high-quality assets in the BC Montney region to its portfolio. The transaction, which is expected to close in early October 2024, includes the assumption of Crew’s net debt and further consolidates Tourmaline’s presence in one of Canada’s premier natural gas plays.
Acquisition Details:
- Tourmaline has entered into a definitive arrangement to acquire all issued and outstanding common shares of Crew Energy Inc. in exchange for 18.778 million Tourmaline common shares.
- The acquisition also includes the assumption of approximately $240 million in net debt, bringing the total consideration to approximately $1.3 billion.
- The acquisition is expected to close in early October 2024, pending customary closing conditions.
Strategic Fit:
- This acquisition aligns with Tourmaline’s ongoing strategy to consolidate its position in the BC Montney region, adding high-quality assets that are adjacent to its existing South Montney operations.
- The Crew Energy assets include low decline base production of 29,000-30,000 boepd and significant reserves and drilling inventory, with 473.2 million boe of 2P reserves and over 700 Tier 1 drilling locations.
Growth and Financial Impact:
- The acquisition is expected to be immediately accretive to Tourmaline’s financial metrics, adding over $200 million to its anticipated 2025 free cash flow.
- The Crew Energy assets offer a substantial growth opportunity, with plans for the Groundbirch development project to potentially double Crew’s existing production within five years.
- Tourmaline plans to prioritize capital projects and volume growth in response to improving commodity markets, with a focus on shareholder returns.
Operational Synergies:
- Tourmaline has identified several synergies from the acquisition, including drilling and completion cost improvements and infrastructure capital cost reductions. The initial value of these synergies is estimated at over $0.6 billion, with additional value expected from further productivity gains and cost improvements.
Dividend Increase:
- Tourmaline’s Board has approved a 6% increase in the quarterly base dividend, effective Q3 2024, raising it from $0.33/share to $0.35/share.
This acquisition marks a pivotal step in Tourmaline’s ongoing strategy to consolidate and expand its operations in the Montney region. By integrating Crew Energy’s assets, Tourmaline is well-positioned to enhance its production capacity, achieve significant financial accretion, and continue delivering strong returns to its shareholders. As Tourmaline progresses towards becoming Canada’s largest Montney producer, this transaction underscores its commitment to long-term growth and operational excellence in the natural gas sector.
