Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Waterous president and CEO Adam Waterous, seen here on Jan. 4, 2005, is convinced his gamble in buying the debt-laden oil company will pay off.

Todd Korol/The Globe and Mail

The spectacular downfall of a Calgary energy company once viewed as a national success story has resulted in one Canadian billionaire recording his biggest ever business loss, but the new buyer sees nothing but opportunity.

Once valued at more than $4-billion, Pengrowth Energy Corp. disappeared from the Toronto Stock Exchange earlier this month after being acquired by Calgary-based energy investment firm Waterous Energy Fund for $740-million.

But Waterous president and CEO Adam Waterous, once the global head of investment banking at Bank of Nova Scotia, is convinced his gamble in buying the debt-laden oil company will pay off.

Story continues below advertisement

That’s because of its key asset, the Lindbergh steam-driven heavy-oil project in eastern Alberta, completed just before oil prices began a years-long downturn in 2014.

Waterous has invested close to $1.4-billion in Canada’s oil and gas patch over the past two years – something of an anomaly for a sector that has seen international and Canadian investors turn their backs over the past few years.

For the most part, the company has eyed long life, low decline assets with high cash flows. That’s where Lindbergh – with its 10-per-cent decline rate and its $200-million in free cash flow last year – fits in.

Mr. Waterous also likes Lindbergh’s 60-year life index.

“To give you a sense on that, fewer than 1 per cent of oil and gas assets in North America would have a reserve life that long,” he said in an interview.

Waterous acquired Pengrowth by way of one of the investment firm’s portfolio companies, Cona Resources Ltd.

The move makes Cona the largest privately owned heavy-oil producer in North America and, according to Mr. Waterous, the plan is to almost double oil production at Lindbergh from 18,000 barrels a day to 35,000.

Story continues below advertisement

No decisions have been made on the future of Pengrowth’s other major asset, its natural-gas property near Groundbirch in northeastern B.C.

Under a prepackaged bankruptcy deal, Pengrowth shareholders were paid 5 cents a share – 75 per cent less than the company’s trading price when it announced the acquisition plan in November.

Pengrowth’s largest stockholder was Seymour Schulich, an 80-year-old Canadian mining and energy financier. He lost $180-million on the deal.

“This is the biggest loss I’ve ever taken,” he told The Globe and Mail.

Mr. Schulich said the acquisition plan presented a stark choice for shareholders – to take a nickel, or take nothing at all.

“The deal’s done now. It’s the best deal they could do. I think the buyer exercised a great knowledge of opportunity and did exactly what I would have done in his shoes,” he said.

Story continues below advertisement

Pengrowth, once one of Canada’s largest and most prominent energy trusts, enjoyed a market capitalization of $4-billion in 2011. But it struggled after its transition to a regular corporation when Ottawa essentially put a stop to income trusts.

In late 2018, the company sought new financing in the high-yield debt market. It couldn’t find any, so instead put itself up for sale.

In the end the buyer was Waterous, through Cona, which also picked up Pengrowth’s $780-million of debt in the transaction. It will dramatically reduce that debt by rolling Pengrowth into Cona and injecting $584-million of equity.

Mr. Waterous said the acquisition deal was reached through “a lot of good diplomacy.”

“It was a multimonth negotiation with all of the relevant stakeholders to meet a consensual transaction,” he said.

“It’s difficult when people are taking a haircut, especially when you’re a shareholder getting a 75-per-cent reduction from the share price.”

Story continues below advertisement

But Mr. Schulich called the acquisition of Pengrowth “a Canadian tragedy” representative of a tumbling oil and gas sector facing political, economic and access challenges.

“In my mind the villains here are the banks. Had the banks exercised a little patience – not a lot, just a little – oil would go up and this would be one of the great success stories in Canada.”

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies