Crescent Point Energy announces C$2.5bn acquisition of Hammerhead Energy
Crescent Point Energy Corp. (TSX and NYSE: CPG) has reached an arrangement to acquire Hammerhead Energy Inc., a significant player in the Alberta Montney oil region, for a total consideration of C$2.55 billion. This sum encompasses around C$455 million of assumed net debt and comprises both cash and common shares of Crescent Point. Shareholders of Hammerhead Energy are poised to receive C$21.00 for each fully diluted common share via a combination of approximately C$1.5 billion in cash and the issuance of 53.2 million common shares of Crescent Point, valued at roughly C$548 million.
Craig Bryksa, President and CEO of Crescent Point, underlined the strategic importance of this acquisition, stating, “This strategic consolidation is an integral part of our overall portfolio transformation. The acquired assets, which are situated in the volatile oil window in the Alberta Montney and adjacent to our existing lands, provide significant value with premium drilling inventory, infrastructure ownership, and scalable market access. This transaction is expected to be immediately accretive to our per share metrics and to enhance our return of capital profile for shareholders.”
Strategic Highlights and Rationale for the Acquisition
The acquisition transforms Crescent Point into a Montney and Kaybob Duvernay-focused exploration and production (E&P) entity with additional long-cycle assets in Saskatchewan. With the addition of approximately 800 net Montney drilling locations, the deal increases Crescent Point’s estimated total corporate premium inventory to over 20 years, reinforcing the company’s position as a significant player with over 350,000 net acres of contiguous land in the region.
Moreover, this strategic move is set to elevate Crescent Point as the seventh-largest Canadian E&P by production volume and establishes it as the largest landowner in the Alberta Montney’s volatile oil fairway. The company also anticipates a 15 percent increase to its base dividend post-transaction, enhancing shareholder returns.
Operational Synergies and Financial Benefits
The acquisition provides Crescent Point with significant infrastructure ownership, including oil batteries, compressors, and water disposal systems, which is expected to generate substantial operational synergies. From a financial perspective, the transaction is forecasted to be accretive to Crescent Point’s 2024 metrics, enhancing excess cash flow per share by over 15 percent, on average, throughout the five-year plan. Additionally, a leverage ratio of 1.1 times net debt to adjusted funds flow is projected by year-end 2024 at US$80/bbl WTI.
The unanimous approval by the Boards of Directors of both Crescent Point and Hammerhead paves the way for the acquisition, subject to court, stock exchange, and regulatory approvals. Furthermore, approximately 82 percent of Hammerhead shareholders have agreed to support the transaction.
This acquisition signifies a pivotal development in the Canadian energy landscape, as Crescent Point solidifies its operational efficiency and financial performance through strategic growth and a stronger market presence.