Riverstone Energy Ltd (LSE:RSE) shares traded over 10% higher in Tuesday’s early deals as it is set to exit its position in Canadian shale firm Hammerhead, which has agreed to be bought by Crescent Point Energy Corp. in a US$1.86 billion deal.
Crescent Point is to pay the equivalent of US$15.26 per share, comprising US$11.26 in cash and US$4.00 of shares.
The deal sees Crescent Point add scale to an anticipated pro-forma production rate of over 200,000 barrels oil equivalent per day. It comprises 800 drilling locations, which Crescent Point described as 20 years of inventory.
Altogether, the enlarged company will be "the largest owner of land in the volatile oil fairway in the Alberta Montney" shale play, as well as controlling the largest land position in the Kaybob Duvernay play.
Hammerhead’s assets “provide significant value with premium drilling inventory, infrastructure ownership and scalable market access”, Crescent Point chief executive Craig Bryksa said.
London-listed Riverstone holds 15.5 million shares in Hammerhead, representing around 17% of the Canadian shale company, and in a statement it said the transaction value would represent a 24% uplift (versus book value last stated on 30 September).
It will receive some US$198 million of realised cash from the sale plus US$62 million from 8 million shares in Crescent Point.
Riverstone in a statement noted it was "the culmination of months of discussion and negotiation with several potential acquirors of Hammerhead" and the deal is viewed as “extremely attractive”.
At its last published count, on 30 September, Riverstone had US$127 million of cash and after the Hammerhead deal closes it anticipates some 43% of net asset value will be cash.
The investor said it is currently exploring the most efficient means of returning its excess capital to shareholders, whilst taking into account anticipated on-going requirements of its other portfolio companies.
In London, Riverstone shares gained 11.54% to trade at 715p each.