Noah Zivitz

Managing Editor, BNN Bloomberg

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Tamarack Valley Energy Ltd. announced it’s buying Deltastream Energy Corp. to expand its reach in Alberta’s Clearwater oil play.
 
Under the terms of the agreement announced Monday, Tamarack will pay $1.425 billion in a mix of cash and stock.
 
To help fund the deal, Tamarack said it will raise $125 million in a bought-deal sale of 33 million common shares priced at $3.75 apiece. Tamarack’s shares most recently closed at $3.98 on the Toronto Stock Exchange.
 
Tamarack said it expects the Deltastream assets will produce roughly 23,000 barrels of oil equivalent per day next year, and that it plans to hike its annual dividend 25 per cent to $0.15 per share from $0.12 once the transaction closes.

“This transaction builds on the company's core position in the Clearwater, which is recognized as North America's most economic play. Deltastream brings scale and a leading economic development drilling inventory, comprised of high quality, long life assets with low sustaining capital requirements that enhance capital allocation flexibility,” said Brian Schmidt, Tamarack’s president and chief executive officer, in a release.

Even Eric Nuttall, the partner and senior portfolio manager at Ninepoint Partners LP who has been pounding the table for companies to prioritize returning free cash flow to shareholders, said it was too good of an opportunity to pass up. 

“Assets of this quality and assets of this scale do not come around very often. And so when they do, as long as there's a very strong strategic fit, then I think you've got to act. And so I give them a pass on this acquisition,” he said in an interview. Nuttall’s Ninepoint Energy Fund lists Tamarack at its 10th largest holding as of Aug. 31.

This is the second time in recent months that Tamarack has loaded up in the Clearwater. In June, its $93-million acquisition of Rolling Hills Energy Ltd. closed. When that transaction was initially announced in April, Tamarack said Rolling Hills would produce 2,100 barrels of oil equivalent per day for the balance of this year.

Separately on Monday, Topaz Energy Corp. announced it entered into an agreement to acquire a five per cent overriding royalty on all of Deltastream’s Clearwater production for $263.5 million. It said the royalty acquisition is expected to close on Sept. 29.

Topaz also announced it will raise its quarterly dividend seven per cent to $0.30 per share from $0.28.