Hillcrest Energy Technologies. (CSE: HEAT)
From concept to commercialization, Hillcrest is investing in the development of energy solutions that will power a more sustainable and electrified future.
Canadian natural gas producer Tourmaline Oil Corp (TSX: TOU) announced on Monday that it has agreed to acquire another natural gas producer, Crew Energy (OTCQB: CWEGF), for approximately CAD 1.3 billion (about USD 950 million) in total consideration. Tourmaline, the largest natural gas producer in Alberta’s Deep Basin, hopes to strengthen its position in another key Canadian natural gas region, Montney, with this acquisition.
According to the agreement, Crew’s shareholders will exchange each of their company shares for 0.114802 shares of Tourmaline stock, involving nearly 18.8 million common shares in total. Additionally, Tourmaline will assume CAD 240 million in debt. Furthermore, Tourmaline has revised its 2024 production guidance from the previous range of 575,000-585,000 barrels of oil equivalent per day (boe/d) to 582,500-592,500 boe/d.
The transaction is expected to close in October.
In recent years, Tourmaline has been actively involved in exploration, development, and production while acquiring natural gas assets aggressively to solidify its industry dominance. Last year, the company acquired Bonavista Energy for CAD 1.45 billion. By production volume, Tourmaline is Canada’s largest natural gas producer and the fifth-largest natural gas-focused producer in North America.
Despite low natural gas prices leading some North American producers to shut in production or delay or cancel projects, Tourmaline remains optimistic about the long-term prospects of the commodity. This optimism is based on anticipated growth in the North American LNG industry and an accelerated increase in natural gas power generation demand in the region.
Tourmaline’s CEO, Mike Rose, said in an interview, “Typically, the right time for a transaction is at the bottom of the cycle, and we believe we are approaching or are near or have passed the bottom of the natural gas pricing cycle.” He added, “With the doubling of U.S. liquefied natural gas (LNG) capacity and the start of Canada’s West Coast LNG project (Canadian LNG), the outlook for Canadian and North American natural gas is bright.”
A significant aspect of Tourmaline Oil’s acquisition is its high premium, with a premium rate of 72%. Jeremy McCrea, an analyst at BMO Capital Markets, mentioned that such a high acquisition premium has not been seen in Canada’s oil and gas industry for a long time. McCrea noted that there are fewer “cheap” natural gas options left for LNG operators. Meanwhile, British Columbia’s gas production needs to significantly increase with numerous LNG projects coming online over the next decade.
