The top five executives at Hammerhead Energy Inc. HHRS-T are getting $70-million in cash combined after Crescent Point Energy Corp. CPG-T acquires their company, a windfall partly fuelled by shares that were issued to them only seven months ago.
Crescent Point announced in early November that it is buying Hammerhead for $2-billion to add light oil and gas assets in the Montney formation in Alberta. Crescent Point is paying $21 a share through a mix of cash and stock, roughly 40 per cent more than the price Hammerhead started trading at when it listed on the Toronto Stock Exchange in February.
Hammerhead was founded in 2009 and a number of its executives have been with the company for years, meaning they have significant amounts of restricted shares and stock options earned as part of their annual compensation packages. If shareholders approve the takeover, these shares and options will vest immediately, meaning the value will be paid out in cash.
Hammerhead also issued 1.9 million share awards in April of this year, only two months after the company started trading on the TSX. Those shares were worth $40.9-million when Crescent Point’s takeover was announced.
Hammerhead chief executive Scott Sobie, who has been with the company since 2012, will receive the largest cash payout through the takeover, worth $28.1-million. Four senior vice-presidents – Mike Kohut, Daniel Labelle, David Anderson and Nicki Stevens – will each get between $9.6-million and $11.6-million in cash.
The five executives are also set to receive a combined $6.5-million in cash severance payments, and will each hold some Crescent Point shares. Hammerhead did not reply to a request for comment.
Although Hammerhead is a public company, it is controlled by private equity firm Riverstone Holdings LLC, which owns an 82-per-cent stake. Riverstone took Hammerhead public earlier this year by merging it with a special purpose acquisition corporation (SPAC) that it also controlled.
If approved, Crescent Point’s acquisition would mean Hammerhead did not make it a full year as a public company before getting taken out. The takeover also extends a growing wave of consolidation in Canada’s energy sector this year, with previous deals including Tourmaline Oil Corp. paying $1.45-billion in cash and stock for Bonavista Energy Corp., and Baytex Energy Corp. buying Ranger Oil Corp. for $3.4-billion, including debt.
For years, energy producers were hampered with debt and went unloved by shareholders who worried about environmental, social and governance principles, but the oil price resurgence after Russia invaded Ukraine attracted some investors back to the sector. Flush with cash, and operating with much lower debt levels, oil companies are back on the hunt to grow through acquisitions.
The Hammerhead deal is Crescent Point’s second major acquisition this year, after already paying $1.7-billion for Spartan Delta Corp.’s assets, which are also in the Montney region of Alberta. Although Crescent Point’s stock is still up on the year, some investors dumped it following the Hammerhead announcement, with the shares closing at $9.73 on Monday, down 11 per cent from before the news was out. Oil prices have also slumped since the takeover was made public.
Crescent Point’s shares have more than doubled in price over the past five years, after investors started flocking back to the energy sector. However, they remain down nearly 80 per cent from their 2014 peak before oil prices tumbled. Shares of Canadian Natural Resources Ltd., meanwhile, have nearly doubled over the same period.
With reports from Jameson Berkow
Tim Kiladze