Canada’s Top Natural Gas Producer Acquires Rival to Capitalize on Higher Prices

Canada’s Tourmaline Oil Corp. has announced the acquisition of Crew Energy for some C$1.3 billion, or $950 million, as part of expansion plans ahead of an expected uptick in natural gas prices.

Like Tourmaline itself, Crew Energy operates in the Montney Formation and the Alberta Deep Basin, which, the acquiring company noted in its release, are the biggest natural gas reservoirs in Canada.

“Generally, the right time (for deals) is at the bottom of cycles, and we think we are near, or at, or past the bottom in the natural gas pricing cycle,” Tourmaline chief executive Mike Rose told the Calgary Herald in an interview.

“The future looks bright for Canadian and North American gas with the doubling of the LNG capacity in the U.S. and the startup of Canadian LNG on the West Coast,” Rose added.

Tourmaline Oil is already the largest producer of natural gas in Canada but is willing to grow further and is sparing no costs—the price tag of the deal represented a 72% premium over Crew Energy’s last closing price before the deal was sealed.

“This is one of the largest takeout premiums we’ve seen in a long time in Canadian oil and gas,” BMO Capital Markets analyst Jeremy McCrea told the Calgary Herald.

“There are fewer and fewer options for LNG operators to secure ‘cheap’ gas molecules, and as we start to see many of these LNG projects come on stream over the next decade, B.C. natural gas production will need to be meaningfully higher,” McCrea noted.

The Canadian federal government is not a big fan of liquefied natural gas. Earlier this year, resource minister Jeremy Wilkinson made that clear, saying Ottawa was not interested in investing in any LNG projects or supporting them financially through subsidies.

Yet demand trends for LNG globally have been rather bullish and energy companies in Canada have decided to take advantage of the opportunity despite the government’s exclusive focus on emissions.

By Irina Slav for Oilprice.com

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