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Crescent Point Acquires Hammerhead for $1.86 Billion for Expansion in Montney Shale11/08/2023
- Deal worth about $1.86 billion.
- Expands Crescent Point's drilling sites in Alberta's Montney Shale.
- Crescent Point takes over Canadian oil company Hammerhead Energy.
- The purchase positions Crescent Point prominently in the Montney region.
Crescent Point Energy Corp has finalized a deal to acquire Hammerhead Energy Inc. for approximately $1.86 billion. This strategic acquisition significantly expands Crescent Point's drilling locations within the Montney Shale region in Alberta, Canada, positioning the company as a stronger competitor in one of North America's most resource-rich oil areas.
Scale and Production Forecast
With the inclusion of Hammerhead Energy's assets, Crescent Point not only gains valuable territory adjacent to its existing operations but also becomes Canada’s seventh-largest energy producer. This growth in scale is set to enhance Crescent Point's production forecast for 2024, now aiming for 200,000 to 208,000 barrels of oil equivalent per day, a considerable jump from the previously projected 145,000 to 151,000 barrels.
The Montney Shale has been a focal point of oil extraction in Canada due to its lucrative economic prospects. Hammerhead Energy's integration into Crescent Point's portfolio represents a key step in solidifying a long-term position in the region, with over 20 years of premium drilling inventory assured. This move is reflective of Crescent Point's broader portfolio transformation, aiming to optimize operations in essential resource areas.
Financial Terms of the Deal
Financially, the deal is structured as a cash and stock transaction. Hammerhead shareholders are set to receive C$21.00 per fully diluted common share, which calculates to a 5% premium over Hammerhead's last closing price. Additionally, Crescent Point has expressed plans to raise its annual dividend by 15% to 46 Canadian cents per share after the deal's completion.
The market has responded to the announcement with a rise in Hammerhead’s U.S.-listed shares by 5.2%, although Crescent Point's shares experienced a 6.1% drop. Despite the immediate stock fluctuations, this acquisition is seen as a significant sign of confidence in the Montney region's potential, especially considering Crescent Point's earlier C$1.2 billion acquisition of Spartan Delta’s Montney assets.
Industry and Regional Outlook
Industry analysts point to the Montney region's low natural gas finding costs as a substantial attraction for energy investments. The area, spanning a vast 50,000 square-mile stretch across northern Alberta and British Columbia, stands as Canada's premier shale play, drawing increasing interest from U.S. investors and energy companies alike.
About Crescent Point
Crescent Point Energy is a prominent oil producer in North America, with its headquarters in Calgary, Alberta. The company is known for its strategic focus on developing high-return resource plays. Crescent Point's approach is to create shareholder value through an operational strategy that emphasizes safety, cost efficiency, and environmental responsibility. Their efforts are centered on advancing their asset base to achieve superior operational performance.
About Hammerhead Energy
Hammerhead Energy Inc., established in 2009 and based in Calgary, Alberta, was known by different names before, including Hammerhead Resources Inc. and Canadian International Oil Corporation (CIOC). The company is committed to delivering strong performance across corporate, operational, stakeholder, and financial aspects. They focus on large-scale resource development within the Alberta Montney, which is recognized as one of the highest return plays in North America. Hammerhead's operations are characterized by multi-zone, light-oil rich opportunities and a commitment to environmental, social, and governance (ESG) principles.
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