INSIDE THE DEAL
Tourmaline Oil acquires Jupiter Resources for $479m
5 November 2020 By Matthew Farmer
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Mike Rose, CEO, Tourmaline. Image: Tourmaline
Tourmaline Oil Corp. has announced its acquisition of independent Canadian natural gas extraction company Jupiter Resources for $479m (C$626m).
Directors of both companies have already approved the all-stock, debt-inclusive transaction. The deal is subject to closing conditions and shareholder approval and is expected to close on 16 December.
Jupiter’s assets currently produce approximately 67,000 barrels of oil equivalent per day (boepd) from the Alberta Deep Basin.
Tourmaline predicts a decline rate for Jupiter’s assets of 25% between 2021 and 2022. It estimates a spend of approximately $130m to keep the field producing. This involves 20-22 new wells per year, producing more than 70,000 boepd. The company believes the reserve can support this for 13-15 years, using tier one drilling alone.
Jupiter also has an interest in three natural gas processing plants, of which it operates two.
Jupiter Resources CEO Simon Bregazzi said: “I am incredibly proud of the Jupiter team and everything we accomplished over the past six years. I am confident that the high-quality business we built will support Tourmaline’s ambition to become North America’s most efficient and profitable natural gas producer.”
Jupiter Resources “provides synergy” to Modern Resources acquisition by Tourmaline
Jupiter Resources works on some of the same assets as Modern Resources, another company bought out by Tourmaline earlier this month. The $110m (C$144m) acquisition gave Tourmaline full ownership of the Route natural gas processing plant, as well as further production in the Alberta Deep Basin.
Between the two company acquisitions, Tourmaline expects its production to increase by 76,000 boepd. It plans to grow the assets by 3%-5% over the next two years, bringing total extraction to 85,000 boepd. The company expects $300m of free cash flow annually.
The company has said it will sell its gross overriding interests on Modern’s and Jupiter’s assets to Topaz Energy Corp. Topaz is a subsidiary of Tourmaline, which made its initial public offering on the stock market in the final week of October. This transaction would yield $130m, becoming effective from the start of next year.
Tourmaline announced the acquisition as part of its third-quarter results, which showed adjusted revenue increasing by 17% from the previous quarter. On the other hand, net earnings fell by almost 70%. Production of gas and oil stood slightly above levels in the same quarter last year.
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