Alberta focused oiler Prairie Provident Resources Inc (TSE:PPR) unveiled a deal to buy Marquee Energy Ltd for around C$55mln, which will more than double its proved and probable reserves and increase cash flow.
The combined firm will have three high-quality core areas - Michichi/Wayne, Princess and Evi - and exposure to Canadian light oil.
READ: Prairie Provident Resources making royal progress at the Princess area; Mackie reckons it's highly undervalued
The combined land base will comprise 715,000 net undeveloped acres, with over 114 proved drilling locations expected to generate compelling returns at current commodity prices
The boards of both companies have both unanimously approved the acquisition.
Publically traded Marquee has the current output of around 2,700 boe/d (greater than 50 per cent oil and liquids).
Its core assets lie in the Michichi area, where it owns a high working interest in a large, proven Banff light oil accumulation.
Here there are over 60 proved undeveloped drilling locations.
At Michichi, Marquee owns and operates a pipeline-connected, 2,000-barrel-per-day central oil battery, as well as two gas plants and associated infrastructure with 15mln cubic feet per day of combined processing capacity.
The acquisition is via a scheme of arrangement and upon Prairie Provident's production is anticipated to be around 7,700 barrels of oil equivalent per day (69% oil and liquids) and proved plus probable reserves more than double to 43,321 Mboe (thousand barrels of oil equivalent)..
That means a pro forma net asset value per share of $2.71 (or $561mln). The proved plus probable reserve life index (RLI) goes to 23 years (from 10 years).
Prairie added that the combined company will have a total enterprise value of around C$177mln.
Shareholders will benefit from larger cash flows, operational and general and administrative synergies, better economies of scale and significantly improved trading liquidity.
Marquee shareholders will receive 0.0886 of a Prairie Provident share for each of theirs
Based on Prairie Provident Resources' closing price of 42 cents on September 12, the exchange ratio translates to 3.7 cents per Marquee share, or a 24% premium to Marquee's closing price on September 12.
The total consideration, including Marquee's net debt of C$39mln, is around C$55mln.
Concurrent with the arrangement, Prairie Provident announced a C$3.5mln bought deal financing with Mackie Research Capital as lead underwriter and bookrunner.
It and a syndicate of underwriters have agreed to buy for resale 5.129mln subscription receipts of the company at a price of 39 cents each for total gross proceeds of around C $2mln.
There is also an overallotment option.
Also today, the oil firm revealed plans for new, expanded credit facilities to support its continued growth.
Prairie shares shed 8.33% to C$0.38.