Oil and gas M&A moved north of the border on Monday as Tourmaline Oil Corp (TSX:TOU) agreed a deal to buy Bonavista Energy for $1.45 billion, expanding the firm’s footprints in the ‘Deep Basin’, a shale region that straddles the Alberta – British Columbia border in western Canada.
Tormaline is to pay C$725 million of cash to Bonavista shareholders, with the remainder paid in Tormaline shares.
It sees Tormaline add some 60,000 barrels per day of production in the region, in which it is already the basin's largest producer. At around $10.29 per barrel of cash costs, the Bonavista production is seen as attractive amidst strong prevailing oil and gas pricing.
Tourmaline described the acquired assets as “low decline, long-life” production which is expected to deliver some $450 million of net operating income per year in 2024 through 2026.
Bonavista’s assets include an estimated 459 million barrels of proved and probably (2P) reserves, with some 839 horizontal well locations in its inventory across a total of 1.2 million acres of land rights.
Tourmaline in a statement said it anticipates considerable cost synergies on the Bonavista assets.
At the same time, Tourmaline has proposed an increase to its dividend – up to C$1.12 per share for its fourth quarter, marking an 7.7% improvement on an annualized basis. It additionally intends to pay a special dividend of $1.00 per share to existing shareholders, on 1 November.
The dividend hike comes amid a “continued strong financial forecast” for its second half.
In Toronto, Tourmaline stock was up 1.28% on Monday to C$70.41.
October has so far seen the largest shale M&A deal for several years as Exxon agreed the acquisition of Permian shale firm Pioneer Natural Resources (NYSE:PXD) in a $59.5 billion transaction.
The all-stock transaction values each Pioneer share at $253 and more than doubles Exxon's Permian footprint, the vast field in western Texas and New Mexico that has helped turn the US into the world’s largest oil and gas producer.
Exxon said the deal is expected to generate double-digit returns by recovering more resources, more efficiently and with a lower environmental impact.