Whitecap Resources and Veren combine in $15 billion all stock deal
Whitecap Resources and Veren combine in a $15 billion all stock deal: The Saskatchewan perspective
By Brian Zinchuk
CALGARY - A blockbuster merger was announced the morning of Monday, March 10, with Whitecap Resources Inc. (TSX: WCP) and Veren Inc. (TSX: VRN) (NYSE: VRN) announcing a $15 billion all-stock deal.
The companies’ joint press release said the strategic combination would create a “leading light oil and condensate producer with concentrated assets in the Alberta Montney and Duvernay. The combined company will be the largest Alberta Montney and Duvernay landholder, a prominent light oil producer in Saskatchewan and will leverage the combined asset base and technical expertise to drive improved profitability and superior returns to shareholders.”
In this slide from the merger presentation, Veren land is in orange and Whitecap land is in blue. Whitecap Resources.
The companies have entered into a definitive business combination agreement to combine in an all-share transaction valued at approximately $15 billion, inclusive of net debt. Under the terms of the agreement, Veren shareholders will receive 1.05 common shares of Whitecap for each Veren common share held. The combined company will be led by Whitecap’s existing management team under the Whitecap name with four Veren directors to join the Whitecap Board of Directors, including the current president & CEO of Veren, Craig Bryksa. The transaction is expected to close before May 30, 2025.
Indeed, “Veren” didn’t last very long under that name, with Crescent Point Energy Corp. announcing its name change on March. 20, 2024. The new stickers on the lease signs haven’t even had time to fade before this merger will make them obsolete.
In many ways, in Saskatchewan it’s a case of getting the band back together. Veren, formerly Crescent Point Energy Corp., has been on a years-long trend since 2018 of selling off Saskatchewan assets that it built up since around 2007. That build-up, which included around 30 acquisitions, mostly in Saskatchewan, had solidified its dominant position in both southeast and southwest Saskatchewan, with additional operations in west central Saskatchewan, Alberta, North Dakota and Utah. But the change in leadership at then-Crescent Point, from Scott Saxberg to Craig Bryksa in 2018, saw a reversal in the company’s strategy, from growth in Saskatchewan assets to selling off most of them as it focused on reducing debt incurred in the previous buildup. A year ago, it sold off its Flat Lake and Battrum plays to Saturn Oil & Gas. Just the Viewfield Bakken and Shaunavon play remained in Veren’s Saskatchewan portfolio, a dramatic reduction from seven years prior.
Many of the portions of Crescent Point’s once dominant position that were sold off went to Whitecap, especially in the Lampman/Browning area.
Essentially, as Crescent Point gave up its former role as the serial acquirer in southern Saskatchewan, Whitecap has picked up that very role.
The merged company will operate under a CEO whose Saskatchewan roots run deep, as he originally hails from Estevan. Grant Fagerheim, Whitecap’s president & CEO, stated in the release: “We are excited to bring together two exceptionally strong asset bases to create one world-class energy producer with one of the deepest inventory growth sets of both liquids-rich Montney and Duvernay opportunities, along with conventional light oil opportunities in some of the most profitable plays in the Western Canadian basin. Our combined company will include exceptional technical and support personnel from the two companies in both the office and field and an experienced Board of Directors that prioritizes sustainable and profitable growth to generate strong returns for our combined shareholders. We look forward to bringing Whitecap and Veren together and providing increased value to both sets of shareholders well into the future.”
Fagerheim was named the 2022 Saskatchewan Oil Person of the Year at the Saskatchewan Oil and Gas Show.
Craig Bryksa, Veren’s president & CEO, stated, “This strategic combination unlocks significant value for all shareholders and together positions us as a stronger, more resilient company. With enhanced scale, deep inventory, and increased free funds flow generation, we’re building a business with a differentiated competitive advantage. Our combined balance sheet reinforces our financial strength and enhanced credit profile, ensuring the long-term success in an evolving market. Together we’re unlocking synergies, creating new opportunities, and setting the stage for sustainable growth.”
Chris Bullin, vice president, East Division (essentially Saskatchewan), said during the March 10 webcast, “The conventional division becomes an extremely robust entity that brings together over 150,000 boe a day of high net back 81% liquid-weighted light oil focused volumes to drive corporate free cash flow generation.
“The combination of Whitecap and Veren lands in Saskatchewan provides an ideal opportunity, as these lands each other exceptionally well, which has further solidified our position as the premier conventional producer in Saskatchewan, with the largest producing volumes per day, when excluding heavy oil thermal operation. We continue to be the most active conventional driller in Saskatchewan, and now, with our combined activities are even more significant, with approximately 200 wells planned to be drilled in Saskatchewan for 2025.
“These sustainability driven assets are further enhanced in aggregate as overall base declines are reduced to less than 20%, bolstered by the increased weighting and EOR volumes from both the Veren’s dominant positions in the Viewfield Bakken in eastern Saskatchewan and the Shaunavon in southwest Saskatchewan, with approximately 60,000 boe per day under secondary or tertiary recovery within the division, 80% of which resides in Saskatchewan. Whitecap is the dominant EOR producer in Saskatchewan.
“The overlay with the existing Whitecap lands provides an optimal opportunity to realize the benefits of the combination. Conventional synergies are expected to drive drill, complete equipment tie-in savings of approximately $25 million on an annual basis. This primarily comes from program rephasing and savings related to size and scale.
“From an inventory perspective, the conventional division has strengthened with this high confidence and repeatable portfolio that now increases to approximately 7,000 locations strong, including over 2,600 premium locations to support over 15 years of running room. Our conventional division is the foundation for free cash flow generation, and the team continues to find opportunities to enhance our already robust inventory duration, when combined with the unconventional division, this complimentary asset portfolio is able to deliver both sustainable cash returns and long-term growth for our shareholders.”
Ensign Drilling Rig 423 was drilling north of Lampman for Whitecap Resources Inc. on March 2. Photo by Brian Zinchuk
Notably, there was something distinctly different about this announcement. Historically, Crescent Point/Veren would stop drilling in an area before an impending sale. But as of March 10, both Veren and Whitecap had rigs working in the field.