Vermilion Energy to Acquire Leucrotta Exploration for C$477 Million
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Vermilion Energy entered into an arrangement agreement to acquire Leucrotta Exploration Inc. for a net cash purchase price of C$477 million. Leucrotta is a Canadian publicly listed Montney-focused oil and natural gas exploration and development company with lands located in the Mica area of Northeast British Columbia and Northwest Alberta.
Under the arrangement, Vermilion will acquire all of the issued and outstanding Leucrotta Shares for cash consideration of $1.73 per share. As part of the arrangement, a portion of the Leucrotta land base and approximately $43.5 million of cash will be transferred to a new company, ExploreCo, which will be managed by the existing Leucrotta team. The net cash purchase price is C$477 million.
The arrangement remains subject to certain closing conditions, including receipt of applicable court, Leucrotta shareholder and securityholder approvals, and other regulatory approvals, and is expected to close in the second half of May 2022.
“With this acquisition and the previously announced Corrib acquisition, Vermilion has achieved our key near-term VETVision objectives. The Leucrotta acquisition is an important component of our strategic plan as it is a scalable asset and is expected to provide us with 20+ years of high value tier 1 drilling inventory. Our previously announced Corrib acquisition increases our European gas exposure and accelerates our debt reduction,” said Vermilion President, Dion Hatcher.
“By the end of this year, we expect to have achieved our key near-term strategic objectives, and most importantly, we did so without the issuance of any additional shares which maximizes the free cash flow for our shareholders and eliminates any potential dilution,” added Hatcher.
About Vermilion
Vermilion is an international energy producer that seeks to create value through the acquisition, exploration, development and optimization of producing assets in North America, Europe and Australia. Their business model emphasizes free cash flow generation and returning capital to investors when economically warranted, augmented by value-adding acquisitions. Vermilion’s operations are focused on the exploitation of light oil and liquids-rich natural gas conventional resource plays in North America and the exploration and development of conventional natural gas and oil opportunities in Europe and Australia.
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The primary Leucrotta asset is the Mica property, comprised of 81,000 gross (77,000 net) contiguous acres of Montney mineral rights in the Peace River Arch straddling the Alberta and British Columbia borders. After spending over two years evaluating this and other assets across the Montney fairway, Vermilion’s team has developed a deep technical understanding of each zone within the Montney. Our team includes members with over 20 years of industry experience in finding and developing conventional and unconventional energy resources in basins worldwide, including the Montney. We have conservatively identified 275 multi-zone, extended reach, drilling prospects to date, representing an expected two decades or more of low-risk, self-funding, high-deliverability drilling inventory with strong rates of return. There is meaningful upside in other zones, which could add significant inventory to this land base and the optionality for cube development.
The multi-zone development nature of these assets is a natural extension of the multi-zone development that our Canadian Business Unit has been focused on in West Central Alberta for over a decade. Integrating these assets into our Canadian asset base will allow us to high-grade our North American portfolio and is expected to add decades of inventory while continuing to develop and grow our international portfolio with the goal of maximizing free cash flow for shareholders over the near and long-term.
The Leucrotta acquisition aligns with our long-term value driven acquisition strategy which targets underexploited consolidation opportunities in core areas with multi-zone development. This acquisition is expected to enhance our North American portfolio by adding an inventory-rich land base in the Montney, providing decades of drilling inventory that we will high-grade as we grow our production base and further strengthen our free cash flow profile. The combination of the Corrib acquisition and the Leucrotta acquisition will allow us to maintain our geographic diversification. On a pro forma basis, including both acquisitions, we expect our international production and FFO weighting to be approximately 36% and 58%, respectively. This diversification, which provides exposure to global commodity prices, has afforded us the ability to fund both of these transactions, with internally generated free cash flow in 2022. Inclusive of the Leucrotta acquisition, we have announced in excess of $1.2 billion of acquisitions equally balanced between international and North America in 2021 and 2022 without issuing any equity.
