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Vermilion Energy buying Leucrotta Exploration for $477 million

A production manager for Canadian based Vermilion oil company, watches an oil rig, Wednesday, Sept. 6, 2017 in Andrezel, south east of Paris. Vermilion Energy Inc. has signed a deal to buy junior energy company Leucrotta Exploration Inc. for $477 million. THE CANADIAN PRESS/AP, Thibault Camus

CALGARY — Shares in Calgary-based Leucrotta Exploration Inc. were up more than 50 per cent midday Monday on news Vermilion Energy Inc. will acquire the junior energy company in a $477 million deal.

Shares in Leucrotta — a Montney-focused oil and natural gas exploration and development company with property in northeast British Columbia and northwest Alberta — were trading at $1.95, up from $1.30 at Friday's close.

Calgary-based Vermilion — an international oil and gas producer with assets in North America, Europe and Australia — announced the deal Monday morning, saying Leucrotta's assets will provide "decades of inventory" to the company's Western Canadian assets.

The deal will see part of the Leucrotta land base and about $43.5 million in cash transferred to a new company that will be managed by the existing Leucrotta team. 

Under the agreement, Leucrotta shareholders will receive $1.73 in cash plus one common share and 0.1917 common share purchase warrants in the new company for each Leucrotta share held.

Vermilion will also acquire a 12.5 per cent stake in the new company for $14 million. The deal includes a break fee of $20 million payable to Vermilion.

In a news release, Vermilion said the Leucrotta assets to be acquired are forecasted to produce approximately 13,000 barrels of oil equivalent per day in 2023, with anticipated capacity to grow to 28,000 boe/d over the next few years. 

Vermilion said it will invest $75 million in infrastructure development and drilling this year, with a long-term plan of maintaining the production base for at least 20 years.

Eight Capital analyst Phil Skolnick pointed out in a note that Vermilion is projected to be free of net debt by the end of 2023. He said the acquisition represents "low-risk, self-funding, high deliverability drilling inventory."

The deal is expected to close in May.

This report by The Canadian Press was first published March 28, 2022.

Companies in this story: (TSX:VET, TSXV:LXE)

Amanda Stephenson, The Canadian Press

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