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Quitting the public arena Two E&P firms scrap public stock listings, go private, driven by low oil prices, a route rarely taken by Canadian energy companies GARY PARK For Petroleum News
Two minnows in Canada’s exploration and production sector have made decisive moves to outlast the sink-or-swim environment in their industry and more are expected to follow.
Canamax Energy and Boulder Energy have scrapped their public stock market listings and gone private for as long as low commodity prices persist, said a prominent law firm.
Boulder’s latest production numbers were up to 8,000 barrels of oil equivalent per day in west-central Alberta, but Canamax has shut down its public website.
Bennett Jones said the companies used private funds to buy back their publicly traded shares and become unlisted - a rare tactic used by only 15 other Canadian energy companies in the past decade.
The law firm said it was not surprised amidst a loss of C$230 billion in market value among public Canadian E&P companies since July 2014, with about C$11.4 billion of those losses taking chunks out of the shares and options held by company insiders.
John Mercury, head of private equity at Bennett Jones, said private equity funds in Canada and the United States are poised to help the transition by using the billions of dollars they have raised in the past year.
He said his firm’s own clients are looking for opportunities to deploy capital, targeting companies that “are stuck in neutral in terms of their ability to access capital.”
They are finding a receptive audience among management teams who are frustrated by their inability to raise growth capital in public markets.
Calgary-based Platino Energy, which operates exclusively in Colombia, said it has struck a deal to be sold to an affiliate of a fund advised by Boston-based Denham Capital Management for C$17.4 million. It said in a news release it has been unable to access equity or debt markets.
It said these obstacles have significantly affected Platino’s ability to deliver on its planned operational activities.
Canamax, which focuses on the Montney formation in northwestern Alberta, said its senior managers and other insiders are teaming up with Dallas-based Edge Natural Resources to buy all the company’s shares for about C$82 million, a 100 percent premium over the most recent closing market price.
Boulder, which was created along with Granite Oil by dividing DeeThree Exploration, said in February it has agreed to be acquired by private equity firm ARC Financial in a C$268 million deal.
Cash-out offers Against this backdrop, Bennett Jones said it would not be surprised if a number of public companies conducting strategic alternative reviews may be more open to accepting cash-out offers from private equity funds.
Taking the more traditional approach to keeping the financial wolves at bay doesn’t always work, as Penn West Petroleum, which averaged output of 86,000 boe per day in 2015, discovered when it sold a core oil property in northern Alberta for C$148 million to gain leniency on conditions tied to its debt.
It reached an agreement with an unnamed buyer for the Slave Point area, which produces 3,900 boe per day, down from 5,500 boe per day last year, representing transaction metrics of almost C$38,000 per boe per day, well below Penn West’s current trading level of about C$41,000 per boe per day.
The company said it has also signed letters of intent to sell some non-core properties for C$80 million. Chief Executive Officer David Roberts had previously shed hundreds of jobs, scrapped its dividend and cut spending a bare bones level - all part of its struggles to finance a C$2 billion debt - in addition to selling assets for C$800 million last year .
However, Kyle Preston, an analyst with National Bank Financial, issued a curt report that “we see no reason to invest” in Penn West because of the key elements underpinning the Slave Point deal.
Roberts said that although Slave Point offers upside, the extension of Penn West’s Viking play and recent Cardium results “provide us with ample development and growth opportunities.”
Others don’t even have those hopes to cling to, such as Terra Energy which has shut down production in Alberta and British Columbia and laid off all non-executive employees after Canadian Western Bank called in a loan of C$15.9 million, plus interest, costs and fees, pushing the company close to bankruptcy.
One source said the bank sees no reason to appoint a receiver, doubting that process would be worth the cost because of economic and regulatory obstacles facing Terra.
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