PE Deals

Waterous-backed Strathcona Resources to buy Pipestone Energy

Upon closing of the deal, expected in the fourth quarter, Strathcona will become a public reporting issuer in Canada.

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  • Strathcona, a Calgary-based oil and gas producer, and Pipestone will be amalgamated to form a new corporation known as Strathcona Resources.
  • The exchange ratio implies an initial market capitalization of about C$8.6 billion
  • Based in Calgary, Waterous Energy Fund is an oil and gas-focused private equity firm

Strathcona Resources, backed by Waterous Energy Fund, has agreed to acquire all of the issued and outstanding common shares of Pipestone Energy Corp, a Calgary-based oil and gas exploration and production company.

Strathcona, a Calgary-based oil and gas producer, and Pipestone will be amalgamated to form a new corporation known as Strathcona Resources (AmalCo).

Upon closing of the deal, expected in the fourth quarter, Strathcona will become a public reporting issuer in Canada. The combined business will have three core areas, each with scale and inventory, and a balance of heavy oil, condensate/NGLs and natural gas production.

Pipestone’s existing shareholders will receive around 9.05 percent of the pro-forma equity in AmalCo on a fully-diluted basis (about 8.87 percent basic), equating to an exchange ratio of 0.067967 AmalCo shares per Pipestone share. Strathcona’s existing shareholders, comprised of Waterous (99.7 percent) and Strathcona employees (0.3 percent), will own the balance.

The exchange ratio implies an initial market capitalization of about C$8.6 billion. When combined with about C$2.9 billion in pro-forma debt outstanding on closing of the transaction, it equates to an initial enterprise value of about C$11.5 billion.

Waterous said it plans to be a long-term shareholder in Strathcona and has no intention to divest of any of its AmalCo shares in connection with the deal.

“Over the last six and half years we have built Strathcona from 5,000 boe/d to 185,000 boe/d through a combination of organic growth and complementary acquisitions,” Strathcona executive chairman Adam Waterous said in a statement. “In doing so we have employed a value investing strategy to grow per share intrinsic value while maintaining a margin of safety.”

Strathcona was formed in a 2020 merger backed by Waterous. Last year, Waterous raised C$345 million to invest in Strathcona’s acquisitions of Caltex Resources and Stickney Resources.

Based in Calgary, Waterous Energy Fund is an oil and gas-focused private equity firm.