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(WO) – Strathcona Resources has agreed to acquire Greenfire Resources in a cash-and-stock deal valued at about C$2.7 billion to C$2.9 billion (US$1.9 billion to US$2.1 billion), including Greenfire’s roughly C$550 million (US$392 million) of net debt. The combined company will be Canada’s fourth-largest SAGD operator, with more than 3 billion bbl of proved plus probable (2P) reserves. That’s a 2P reserves life index of 54 years, which Strathcona says is the longest of any publicly traded Canadian company by about 20 years.
Greenfire shareholders can choose either 0.25 Strathcona shares for each Greenfire share, worth C$9.09 (US$6.48) or a 15% premium to Greenfire’s Nov. 6 close, or C$11.00 (US$7.85) in cash, a 39% premium. Neither option is subject to proration. Waterous Energy Fund (WEF), which owns 72% of Greenfire and 57% of Strathcona, has agreed to support the deal and take shares. Depending on elections, Strathcona expects to issue 43 million to 60 million shares and pay up to about C$740 million (US$528 million) in cash.
The deal brings together two long-life oil sands and heavy oil producers that each plan to grow production 11% to 12% a year over the next five years. They plan to do it by drilling to fill existing facilities and through brownfield expansions. Strathcona said the combined company will be the only one with significant operations across all three major oil sands deposits (Athabasca, Cold Lake and Lloydminster) and all major producing formations (McMurray, Clearwater and Mannville). It will also be the only oil sands operator without natural gas or downstream operations.
Strathcona expects about C$75 million (US$53 million) in annual synergies within the first year from lower borrowing costs, procurement efficiencies and the removal of duplicate public company costs. Greenfire’s C$2.8 billion (US$2.0 billion) of tax pools are expected to extend Strathcona’s cash tax horizon from 2027 to 2031 at US$75/bbl WTI, saving about C$400 million (US$285 million) in cash taxes over four years.
Greenfire’s leadership team, led by president Colin Germaniuk, will run its assets as a new semi-autonomous business unit, SCR Central Athabasca. It joins Strathcona’s existing Cold Lake, Lloydminster Thermal and Lloydminster Conventional units.
The deal comes a year after Strathcona ended its takeover bid for MEG Energy, which agreed to a deal with Cenovus instead.
