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Decades of free inventory from one deal: Vermilion Energy buys Leucrotta Exploration for $477 million
04/07/2022![Decades-of-free-inventory-from-one-deal-Vermilion-Energy-buys-Leucrotta-Exploration-for-$477-million](https://images2.rextag.com/public/blog/57blog_Vermilion_Acquires_Leucrotta's_Montney_Assets_2022.png)
As part of its effort to expand its Montney Shale play, Vermilion Energy Inc. recently acquired Leucrotta Exploration Inc. for a net cash purchase price of CA$477 million.
Dion Hatcher, Vermillion's president, believes the Leucrotta acquisition is integral to the company's strategic plan due to the asset's scalability and expected availability of high-value Tier 1 drilling inventory for at least the next 20 years.
Located in the Mica region of Northeast British Columbia and Northwestern Alberta, Leucrotta is a publicly-traded company focused on Montney hydrocarbon exploration. Leucrotta's acquisition by Vermilion follows its agreement to purchase Equinor Energy Ireland Ltd. last November for CA$556 million (US$434 million).
In addition to adding Equinor Energy Ireland to Vermilion's gas holdings, this acquisition will broaden the company's European gas exposure while also helping it to reduce debt faster.
After completing both deals, Vermillion aims to reduce debt by $1 billion by the end of the year, three years ahead of schedule.
Vermilion anticipates being debt-free by end-of-2023 at current strip prices. As for the company's near-term strategic objectives, Top management also plans to complete them without issuing any more shares, which maximizes free cash flow for shareholders and prevents dilution.
It is anticipated that Leucrotta's acquisition will close by the end of May. While closing of the Corrib acquisition is scheduled for the second half of 2022.
According to the Leucrotta acquisition agreement, Vermilion will pay CA$1.73 per share in cash for all of the company's issued and outstanding shares.
Mica is the primary Leucrotta asset, consisting of 81,000 gross (77,000 net) contiguous acres of Montney mineral rights which border both Alberta and British Columbia. The asset is expected to produce approximately 13,000 barrels of oil equivalent per day in 2023, with a plateau production level of 28,000 barrels per day anticipated over the next few years.
As of today, Vermilion has identified 275 high-quality, high-return, low-risk multi-zone drilling prospects. Top management believes, these prospects represent 20 or more years of low-risk, self-funding, high-deliverability drilling.
Assuming the anticipated May closing date, Vermilion is increasing its capital budget for E&D in 2022 to $500 million and increasing guidance for production from 86,000 to 88,000 boe/d to take into account the Leucrotta acquisition.
The acquisition deal also involves the transfer of a portion of the Leucrotta land base and approximately CA$43.5 million of cash to a new company, which will be managed by the existing Leucrotta team.
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Canadian Assets on Sale: Energy Transfer Sells Gas Processing Bussines to Pembina-KKR for $1.3 Billion
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/60Blog_Energy_Transfer's_Canadian_Assets_2022.png)
Under the agreement, Energy Transfer will sell its 51% interest in Energy Transfer Canada to the Pembina-KKR joint venture, for more than CA$1.6 billion (US$1.3 billion) including debt and preferred equity. KKR's funds already own the remaining stake. TC’s assets include 6 natural gas processing plants with a combined operating capacity of 1.29 Bcf/d and an 848-mile naturalgas gathering and transportation network in the Western Canadian Sedimentary (WCS) basin. While this process is underway, Pembina and KKR will combine their Western Canadian natural gas processing assets into a single, new joint venture entity — Newco, owned 60% by Pembina and 40% by KKR. This new entity is expected to have a natural gas processing capacity of about 5 Bcf/d or about 16% of Western Canada’s total processing capacity.
2023 Closes with a Wave of Deals: Canada to Permian Basin
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/217Blog_Athabasca Oil and Cenovus Energy are joining to form Duvernay Energy.png)
-Crescent Point Energy finalized its $1.9 billion purchase of Hammerhead Energy to expand operations in Alberta's Montney Shale -Two Canadian companies merged to increase their presence in Alberta's Kaybob Duvernay area -Ring Energy completed acquisition in the Permian Basin
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/297_Blog_Keystone XL Pipeline Controversy and Wildlife Disaster From Trump's Green Light to Biden's Red Light on the 15 Billion Project.jpg)
The pipeline industry in the USA faced and still faces a range of regulatory challenges, including permitting delays, environmental requirements, and public opposition to pipeline projects. In recent years, pipeline projects like the Keystone XL and Dakota Access pipelines had legal and regulatory obstacles that delayed or canceled their construction. Keystone XL Pipeline, proposed by TransCanada in 2008, aimed to transport crude oil from Canada (around Calgary and Edmonton) to refineries on the Gulf Coast (Port Arthur). The project faced opposition from environmental groups and indigenous communities, who argued that it would contribute to climate change and pose a risk to water resources. In 2015, President Obama rejected the project, citing concerns about its environmental impact. However, in 2017, President Trump revived the project, leading to further legal challenges. In June 2021, U.S. President Joe Biden officially canceled the project on his first day in office.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/282_Blog_Renewable Natural Gas How RNG Changes the Industry.jpg)
The renewable natural gas (RNG) industry in the United States is showing promising signs of growth. As of 2019, the U.S. consumed 261 billion cubic feet (BCF) of RNG, primarily utilized by independent power producers, electric utilities, and various commercial and industrial entities. However, this figure represents only a small fraction of its potential. Research indicates that the U.S. could theoretically produce up to 2,200 BCF of RNG through anaerobic digestion alone, which would equate to about 11% of daily national natural gas consumption.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/295_Blog_Renewable Efforts Lag as Global Oil and Gas Demand Continues to Rise.jpg)
Recently, the progress toward an energy transition is hitting a snag. Sales of electric vehicles are decelerating, and the growth in wind and solar power needs to be keeping pace with expectations. To make matters more challenging, electricity prices are climbing when they were expected to fall. Amidst these setbacks, the oil and gas sectors are proving resilient. According to BP's latest energy outlook, not only are these energy mainstays here to stay, but their demand is expected to remain relatively high even after reaching a peak. Interestingly, BP forecasts that oil demand will reach its zenith next year, marking a critical moment in energy consumption trends. This isn't the first time BP has projected a peak in oil demand. Back in 2019, their review anticipated a decline in demand growth, but the prediction fell flat. Instead, oil demand surged to unprecedented levels following the end of the global pandemic lockdowns, defying previous forecasts and underscoring the enduring dominance of traditional energy sources in the global market.