Tourmaline continues to buy from Montney with $ 750 million contract for Black Swan – –

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Tourmaline continues to buy from Montney with $ 750 million contract for Black Swan – –


Tourmaline, led by CEO Mike Rose, buys Black Swan Ltd. for about $ 750 million in stock.

Chris Bolin/The Globe and Mail

Tourmaline Oil Corp. purchases Black Swan Energy Ltd. for approximately $ 750 million in shares, marking the latest in a series of acquisitions aimed at expanding into British Columbia’s prolific Montney gas region.

Tourmaline, led by President and CEO Mike Rose, sees the northern part of the Montney region as a major supply source for future liquefied natural gas plants on the west coast of Canada, and has strengthened its dominance there.

Prices for natural gas-producing assets have yet to fully recover from the 2020 lows caused by the pandemic, which continues to generate opportunities to strengthen the company’s position, Rose said.

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“This is a strategy that we came up with a few years ago – when things become available and if the prices are right and we can generate free cash flow, this is the critical selection criterion,” a- he said in an interview.

The company’s shares jumped 8 percent to $ 33.25 on the Toronto Stock Exchange on Friday. Tourmaline has risen 175% in the past year after deals that include the initial public offering from its royalty and middleman subsidiary Topaz Energy Corp.

Investors recognize Montney as one of the best regions in North America for natural gas and condensate. They welcome the growth of the business there because of its vast resources and Tourmaline’s ability to operate efficiently, said Robert Fitzmartyn, analyst at Stifel FirstEnergy.

That’s why Mr. Rose can issue stocks to close deals and be rewarded, when many of his rivals would not find market support. Black Swan is owned by the Canada Pension Plan Investment Board and private equity managers Azimuth Capital Management and Warburg Pincus LLC.

“At the end of the day, I think people – the private equity management teams – want his paper because it’s good value. He’s a low cost guy, so the capital management is some of the best, ”Mr. Fitzmartyn said.

The company is preparing for a new export market in the coming years. LNG Canada, led by Royal Dutch Shell PLC, is building an $ 18 billion LNG terminal in Kitimat, British Columbia, which would be powered by natural gas from Montney. The goal is to complete the pipeline by the end of 2023, to start testing the line in 2024 and to have the new liquid gas supercooling plant in 2025 for export to tankers bound for China. ‘Asia. Other projects could follow, increasing demand for gas in the region.

Mr. Rose described the acquisition environment as a “generational opportunity” to consolidate production in the Montney, as well as in the Deep Basin area of ​​Alberta, where the company has also purchased assets.

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“If commodity prices continue to rise, or even hold up where they are, I think [mergers and acquisitions] the opportunity disappears, ”he said.

As part of the deal, Tourmaline will issue 26 million of its shares to Black Swan. It will also assume up to $ 350 million in debt, bringing the total value of the acquisition to $ 1.1 billion.

Black Swan produces about 50,000 barrels of oil equivalent per day, and that number is expected to rise to 60,000 next year as part of an expansion plan. Tourmaline said the acquisition is in addition to its own holdings in the region, which it increased earlier through deals to buy Polar Star Canadian Oil & Gas, Chinook Energy Inc. and Saguaro Resources Ltd.

It now plans to produce 500,000 barrels of oil equivalent per day by the middle of next year.

At the same time, he said he was increasing his quarterly dividend by 6.35% due to the additional free cash flow he would generate by acquiring Black Swan.

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