Canadian oil producer Paramount Resources Ltd agreed to sell some of its Deep Basin oil and gas properties in Alberta to Seven Generations Energy Ltd for about $1.9 billion (US$1.47 billion).
The divestiture is the latest example of struggling oil and gas producers selling off assets in a bid to survive the global crude price rout, which has lasted since mid-June.
The transaction will help the company fund its development of the remaining assets in Montney, Duvernay and other resources, Paramount Chief Executive Jim Riddell said in a statement.
Paramount said it would receive $475 million in cash and 33.5 million class A common shares of Seven Generations, which will also assume the company’s senior unsecured notes worth about $584 million due 2023.
Paramount had net debt of about $1.9 billion as of December 31, according to its filing.
Upon deal closure, Paramount will own a stake of about 10 percent in the Calgary natural gas developer, making it the second-largest shareholder after the Canada Pension Plan Investment Board.
Paramount said billionaire Calgary oilman Clayton Riddell, who holds about 37 percent of the company’s outstanding shares, has agreed to favour the transaction.
The assets, which are located in the Musreau/Kakwa area, had estimated sales volumes of about 30,000 barrels of oil equivalent per day for the three month period ended June 30.
Paramount agreed in March to sell a natural gas processing complex in the Montney shale formation in Alberta to Pembina Pipeline Corp for $556 million (US$428.5 million) in cash.
BMO Capital Markets was Paramount’s financial adviser, while Norton Rose Fulbright Canada LLP provided legal counsel.
Peters & Co Ltd and RBC Capital Markets acted as financial advisers to Seven Generations. Credit Suisse was its strategic adviser.
Paramount’s shares closed at $10.94 on Wednesday. They have recovered sharply since hitting a 19-year low of $2.86 in January.
Update: Seven Generations went public in November 2014. CPPIB has backed the company since mid-2012, investing $200 million in total.
(Reporting by Anet Josline Pinto in Bengaluru; Editing by Anil D’Silva)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Seven Generations Energy Ltd