Pump jacks pump oil in Alberta on May 12, 2014.Todd Korol/The Globe and Mail
Cardinal Energy Ltd., a dividend-paying junior oil producer, has snapped up assets in central Alberta for $165-million, a deal it is funding with an equity issue.
Cardinal also said it is raising its monthly payout to investors, citing strong commodity prices, lower cost and higher output.
The company, which went public in 2013, is acquiring assets in the Wainwright area of Alberta that produce 1,900 barrels of oil a day. Proved plus probable reserves are pegged at 9.8 million barrels.
Cardinal is one of a new breed of energy company structured to meet strong demand among investors for yield plays following the demise of income trusts.
Since the company's shares began trading on the Toronto Stock Exchange in December, they have climbed 63 per cent.
The lion's share of the acquisition is a 100 per cent interest in the Wainwright B pool, which has produced oil since 1973 and is currently pumping with the aid of water-flood enhanced recovery, the company said.
To fund the deal, Cardinal is issuing $148-million in shares in a bought deal led by CIBC World Markets Inc. and RBC Dominion Securities. The underwriters agreed to buy 8 million common shares at $18.50 apiece.
Meanwhile, the company said it would raise its monthly dividend to 7 cents a share, an amount it said is consistent with its target payout ratio of 30 per cent to 35 per cent of cash flow.
Jeffrey Jones