Oil and gas company Paramount Resources Ltd. is demanding a cash payout for its shares in Strath Resources Ltd. when it is merged with another private firm.
Calgary-based Paramount says neither the amalgamation nor the process followed were in the best interests of Strath and its shareholders and it is exercising its “right of dissent” under the Alberta Business Corporations Act to be bought out for fair value. It didn’t specify a price.
In 2018, Strath bought Paramount’s oil and gas producing assets in the Kakwa region of northwestern Alberta for $340-million, with half paid in cash and the rest by 85 million common shares at $2 each.
The deal gave Paramount 15.6-per-cent ownership of Strath and a seat on its board of directors.
Analysts say it’s unlikely the fair value of the Strath shares would be the same $170-million today, given the global economic slowdown and resulting oil price retreat owing to the COVID-19 pandemic.
Investment firm Waterous Energy Fund announced Friday that Strath would be merged with Cona Resources Ltd. to form Strathcona Resources Ltd.
Waterous said the two companies’ assets “fit perfectly together” and the combined business would produce about 60,000 barrels of oil equivalent per day (67-per-cent oil and liquids).
“Technology has disrupted the North American oil and gas industry’s historic M&A [merger and acquisition] dynamics and traditional growth-oriented operating and investing thesis,” Waterous chief executive Adam Waterous said Friday in a news release.
“To capitalize on this new era, we have used an innovative investing model to build Strathcona into a scaled company which can continue to consolidate complementary businesses and/or use its free cash flow to provide dividends.”
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