ARC Resources, Seven Generations Energy sign $6.3bn merger deal

Canadian oil and gas companies ARC Resources and Seven Generations Energy have agreed to merge in an all-stock deal worth nearly CAD 8.1 billion ($6.38 billion) with an objective to become a leading producer in the Montney Formation in the country.

Apart from the Montney region in Alberta and northeast British Columbia, ARC Resources’ operations are focused on the Pembina Cardium region in Alberta.

Seven Generations Energy, on the other hand, is pursuing the Kakwa River Project, which involves the development of a liquids-rich natural gas asset in the Montney Formation.

ARC Resources will be the surviving company post-merger with headquarters in Calgary.

Post-transaction, the Canadian oil and gas company will have a 2021 daily production of over 340,000 barrel of oil equivalent (boe), comprising around 138,000 barrels of liquids and nearly 1.2 billion cubic feet (Bcf) of natural gas.

Canadian oil and gas companies ARC Resources, Seven Generations Energy sign $6.3bn merger deal. Photo courtesy of Business Wire.

ARC Resources is set to be Canada’s sixth largest upstream energy company. Besides, it expects to be the third largest natural gas producer and the largest condensate producer in Canada following the merger with ARC Resources.

In a joint statement, the companies said: “The combined company’s balanced portfolio of top-tier, long-life condensate, liquids-rich, and natural gas assets will expand internal investment optionality. Capital allocation can be further optimized across all commodity cycles to enhance returns and deliver increased shareholder value.

“The premier Montney land base of the combined company will comprise over 1.1 million net acres of Montney land and a deep inventory of high-return, de-risked core development opportunities. Free funds flow will be allocated towards the company’s highest-returning assets for development, debt reduction, and potential return of capital to shareholders through share buybacks and/or dividend increases.”

Under the terms of the merger, shareholders of Seven Generations Energy will exchange their shares in the company for 1.108 common shares of ARC Resources. As per this exchange ratio, the shareholders of Seven Generations Energy will own nearly 49% of the enlarged company and the rest of the 51% or so ownership will be held by the original shareholders of ARC Resources.

Subject to the two companies’ shareholder approvals, regulatory approvals, and other customary closing conditions, the merger is expected to close in the second quarter of this year.