Canada's Strathcona to acquire Greenfire for up to C$2.9 billion

en.Wedoany.com Reported - On November 8, Canadian oil producer Strathcona Resources signed a definitive acquisition agreement with Greenfire Resources, under which Strathcona intends to acquire all issued and outstanding shares of Greenfire through a cash-and-stock transaction valued at approximately C$2.7 billion to C$2.9 billion, including approximately C$550 million in net debt. The acquisition involves oil sands production assets in the Athabasca region of Alberta, Canada, and is expected to close by the end of January 2027, subject to shareholder, court and regulatory approvals.

Under the agreement, Greenfire shareholders may elect to receive 0.25 of a Strathcona share per share or C$11.00 in cash. Based on the closing price on November 6, the share consideration implies C$9.09 per share, a premium of approximately 15%; the cash consideration represents a premium of approximately 39% to Greenfire's closing price over the same period and approximately 26% to the prior 30-day volume-weighted average price. Neither consideration option is subject to pro rata allocation, and shareholders may elect the payment arrangement of their choice.

Existing major shareholder Waterous Energy Fund holds approximately 72% of Greenfire's shares and approximately 57% of Strathcona's shares. The fund has entered into a transaction support agreement and has committed to convert all of its Greenfire shares into Strathcona shares. Depending on the elections of the remaining shareholders, Strathcona expects to issue approximately 43 million to 60 million new shares, representing 17% to 22% of the combined company's shares, with total cash payments of up to approximately C$740 million.

Following completion of the transaction, Greenfire's oil sands assets will be integrated into a newly established Strathcona business unit, SCR Central Athabasca, which will continue to be responsible for day-to-day operations under Greenfire's existing management team, with Greenfire President Colin Germaniuk serving as head of the unit. The new unit plans to adopt a relatively independent operating and management model, managing the combined heavy oil and oil sands assets alongside Strathcona's three existing business units: Cold Lake, Lloydminster Thermal and Lloydminster Conventional.

The two companies expect that the combined entity will have proved plus probable (2P) oil reserves exceeding 3 billion barrels, equivalent to approximately 54 years of production based on the reserve life index used by the company. Strathcona and Greenfire have also each set plans for average annual production growth of 11% to 12% over the next five years, intending to increase output through infill drilling at existing facilities and expansion of existing projects. The above reserve and growth figures are combined estimates and future plans disclosed in connection with the transaction.

Strathcona expects that the combined business will generate approximately C$75 million in annual synergies within the first year of operational integration, and that by utilizing Greenfire's existing tax deduction resources, the deferral of cash income tax obligations will be extended from 2027 to 2031, with expected cash tax savings of approximately C$400 million over the next four years. These benefits are the company's projections of the financial effects following completion of the transaction.

The parties expect to hold special meetings of shareholders in January 2027. The transaction requires the approval of at least two-thirds of the votes cast by each company's shareholders, as well as applicable minority shareholder approvals. Subsequent approvals are also required from the Canadian competition regulator, the Toronto Stock Exchange and the Alberta Court of King's Bench. Upon completion of the transaction, Greenfire will be amalgamated into Strathcona, and the combined company will continue to use the name Strathcona Resources.