The adage "you snooze, you lose" is one adhered to by a Calgary-based oil and natural gas producer very much active this week in the acquisition derby, and serving notice that more buys of smaller petroleum properties could be round the corner.
Crescent Point Energy Inc. (T.CPG) is a conventional producer with assets strategically focused in Western Canada, which has made its way in the financial world by implementing a three-part business strategy to drive shareholder growth in reserves, production and cash flow.
For starters, Crescent Point parlays its balance sheet and growth capital to acquire focused, long-life, high-quality reserves and production in western Canada
Step two consists of managing the risks associated with the oil and gas industry and to provide long-term stability to its dividends. To accomplish this, CPG has maintained a conservative balance sheet with significant unutilized lines of credit
Lastly, Crescent Point uses its large, low-risk drilling inventory to maintain production, reserves and dividends. The company currently has more than 5,000 locations of low-risk development inventory and more than 340,000 barrels of oil equivalent per day (boe/d) of potential risked production additions.
On Wednesday, CPG was not diffident in exercising one major arm of that strategy, acquiring Wild Stream Exploration Inc., a publicly traded and 90 percent oil-weighted company with production of approximately 6,400 boe/d.
CPG expects to scoop up approximately 5,400 boe/d of Wild Stream's production, 91% of which borders on the company’s assets in the Shaunavon and Battrum/Cantuar areas of southwest Saskatchewan. The balance of Wild Stream's production will be transferred into a new junior exploration company in which CPG will hold 2.65 million shares.
Once the Wild Stream deal goes through, Crescent Point's average daily production in 2012 is expected to increase to 83,500 boe/d from 80,000 boe/d and its 2012 exit production rate is expected to increase to more than 90,000 boe/d from 85,000 boe/d.
A release issued the day of the announced deal stated that, in the Shaunavon resource play alone, the Company expects to have combined production of greater than 15,000 boe/d and more than 800 net sections of land, which include more than 200 net sections expected to be acquired in the Wild Stream Arrangement.
Crescent Point bought up all of the issued and outstanding shares of Wild Stream at an exchange ratio of 0.17 of a Crescent Point share for each Wild Stream share. In addition, Crescent Point expects to assume approximately $50.8 million of Wild Stream net debt, including deal costs and after taking into account proceeds from stock options and warrants expected to be exercised.
The Company's aggregate consideration for Wild Stream is approximately $610.9 million, based on a five-day weighted average trading price of $45.62 per Crescent Point share.
CPG shares were trading late Friday afternoon at $45.58, down 51 cents or 1.1% from the previous day.
