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Tamarack Valley Energy Ltd. agreed to buy Headwater Exploration Inc. for $10 billion, the latest in a wave of deals in Canada’s oil patch.
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Oil sands producers have been looking to consolidate as the industry prepares for the possibility of new pipeline expansions and higher capital spending, giving a small group of companies an increasingly dominant position in the region.
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The combined company, which will be led by Tamarack management, will produce about 80,000 barrels of oil equivalent a day and benefit from cost savings that will enable an increase in shareholder returns, according to a statement on Tuesday.
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Steve Buytels, president of Tamarack, will run the combined company and join the board of directors, according to the statement.
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Under the terms of the all-stock transaction, Tamarack shareholders will own 66.5 per cent of the combined entity, with Headwater investors holding the remainder. Tamarack will issue a total of 237.8 million common shares.
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The combined company is expected to see immediate synergies through the integration of operations, marketing and corporate offices. In connection with the deal, Tamarack plans to increase its quarterly dividend by 20 per cent to $0.06 per share starting in December, according to the statement.
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National Bank of Canada Capital Markets is acting as exclusive financial adviser to Tamarack, while Peters & Co. is working with Headwater. The deal is expected to close midway through the fourth quarter, according to the statement.
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