Intermediate oil and gas producer Twin Butte Energy (TBE-T) is making the most of the flood of assets available for acquisition in the oil patch by striking its second takeover of the year, scooping up private heavy oil producer Avalon Exploration.
The share-for-share deal, valued at about $90-million including debt, comes on the heels of closing a $170-million deal to acquire Emerge Oil & Gas. The latest target, Avalon, has current production of 1,920 barrels of heavy oil per day and 85,000 net acres of undeveloped land.
Back in January when Twin Butte closed its first deal in 2012, management said that it was focused on growing organically. However, they left open the possibility of acquisitions because of a “significant supply of oil and gas assets on the market.” Plus, the firm said that targets like getting Twin Butte shares because they pay a dividend. Twin Butte currently yields 8.4 per cent.
This reasoning proved to be true with the new Avalon deal as David Bredy, the target’s chief executive officer, cited the monthly dividend stream as justification for why his private shareholders should back it. He also noted that they get to own stock in a larger company -- though ‘large’ is relative because Twin Butte current has a market capitalization of just over $400-million.
Avalon fits nicely into Twin Butte’s asset profile because its production lies within core Twin Butte’s Lloydminster heavy oil area. Its 85,000 net acres of undeveloped land also doubles Twin Butte’s undeveloped heavy oil lands in the region.
Total production after the latest deal wasn’t detailed, but after buying Emerge, Twin Butte’s production jumped to 13,450 barrels of oil equivalent per day -- about 80 per cent oil and natural gas liquids, the rest natural gas.
Jennings Capital advised Avalon while GMP Securities advised Twin Butte.