en.Wedoany.com Reported - Highwood Asset Management Ltd. (TSXV: HAM) announced the signing of a definitive agreement to sell its Wilson Creek assets to Obsidian Energy Ltd. for total consideration of up to C$112 million.
Under the agreement, Obsidian Energy will pay C$105 million in cash consideration (before closing adjustments) and up to C$7 million in contingent consideration, payable in quarterly installments from Q3 2026 to Q2 2027 based on West Texas Intermediate (WTI) crude oil prices. The transaction has an effective date of April 1, 2026, and is expected to close around June 30, 2026, subject to customary closing conditions and regulatory approvals. Highwood plans to use a portion of the upfront consideration to reduce outstanding debt, improving its balance sheet and overall liquidity.
Since its acquisition in August 2023 for a net consideration of approximately C$35 million, the Wilson Creek assets have achieved a pre-tax return on invested capital of over 200%, generating approximately C$26 million in asset-level free cash flow as of March 31, 2026. Since completing the Brazeau, Castlegate, and Shale acquisitions in August 2023 at 2.2x field net operating income and 0.5x 1P reserves, the company's production has increased from approximately 4,000 boe/d to over 6,000 boe/d, while achieving high recycle ratio conversions (PDP: 1.4x; 1P: 2.0x; 2P: 3.3x). The sale of Wilson Creek represents the next phase of the company's strategy, focusing capital on long-term, high-margin assets in the Brazeau area and other early-stage opportunities. Net proceeds from the divestiture will be used to reduce net debt, which is expected to be approximately C$15 million after the transaction closes.
Under WTI at US$65/bbl, the Brazeau assets have a recycle ratio of approximately 2.6x, a pre-tax payback period of 12 months, capital efficiency of approximately C$19,000/boe/d, and a corporate free cash flow breakeven below WTI US$45/bbl. The company has initiated a waterflood program in the area. According to an evaluation by independent reserve evaluator GLJ Ltd. of Highwood's reserves as of December 31, 2025, the company's retained reserves have a pre-tax NPV10 of approximately C$153 million on a proved developed producing (PDP) basis and approximately C$306 million on a total proved (1P) basis; after deducting approximately C$15 million in pro forma net debt, the implied net asset value per share is approximately C$9.00 (PDP) and C$19.00 (1P).
Highwood plans to deploy capital to assets near the Mannville stacked play area in eastern Alberta before year-end and has been continuously increasing its portfolio in the region through multiple Crown acquisitions. These lands offer multiple opportunities, including potential steam-assisted gravity drainage projects. The company will continue to explore strategic alternatives for its lithium, critical minerals, and rare earth element assets and has seen interest from potential strategic partners. As part of its commitment to enhancing shareholder returns, Highwood plans to implement its first normal course issuer bid in the second half of 2026, subject to board approval and acceptance by the TSX Venture Exchange.
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