A company proposing a liquefied natural gas project in Atlantic Canada has launched a reverse takeover of a Quebec exploration firm in a bid to bolster its ability to fund the multibillion-dollar development.
Privately held Pieridae Energy Ltd., backer of the Goldboro project in Nova Scotia, said it agreed to an amalgamation with TSX Venture Exchange-listed Pétrolia Inc., under which the resulting company would be a publicly traded, integrated LNG producer.
As part of the deal, Pieridae will seek a $50-million private placement of subscription receipts, which would be converted to shares in the new company when the transaction closes. Laurentian Bank of Canada and National Bank of Canada have agreed to market the financing on a reasonable-efforts basis.
The merger with Quebec City-based Pétrolia will create an LNG venture with operations from production to sales, the companies said. It will require approval by both sets of shareholders.
Pieridae has proposed a liquefaction project that could cost $5-billion to $10-billion, with completion slated for 2021-2022, according to its website. The company is led by Calgary businessman Alfred Sorensen, who started, then sold, a Kitimat, B.C., LNG proposal that is now backed by Chevron Corp. and Woodside Petroleum Ltd.
Pieridae has invested $65-million in the Nova Scotia plan, though it has yet to make a final investment decision.
The deal comes as the outlook for LNG projects in Canada has become murkier due to intense global competition, notably on the U.S. Gulf Coast, and weak pricing for the supplies. Numerous major projects planned for the British Columbia coast by some of the world's largest energy companies have been delayed.
For Pétrolia, the deal opens up a front beyond Quebec following the provincial government's decision to quash plans for oil drilling on Anticosti Island.
Pétrolia and the government were among four partners in a group that planned to start exploratory work on the island, which is estimated to contain one of the province's largest oil reserves. Philippe Couillard's Liberals nixed the plan, negotiated by the previous Parti Québécois government, saying Anticosti's resources would never be developed as long as they are in power.
Quebec recently began talks with its partners on compensation. The project was valued at $200-million, potentially bringing Pétrolia's 21.7 per cent share of damages to about $43-million. It currently has a market capitalization of about $18-million.
Pétrolia's properties are all in the exploration stage and the company has yet to determine whether any of them contain economically feasible reserves, according to its most recently published quarterly management discussion and analysis. Its most promising assets include the Bourque gas project near Murdochville, Que. The company tallied a net loss of $1.9-million in fiscal 2016 and had $6.5-million in cash at the end of the year, including $5.7-million held for exploration purposes and $1.5-million in positive working capital.
Meanwhile, Pieridae said its liabilities currently exceed its assets by $24-million, which it said is consistent with the Goldboro project's development stage.
With a file from Nicolas Van Praet in Montreal