Whitecap Resources Inc. and Veren Inc. are joining forces on a $15 billion deal to create a leading shale player in Canada that each will be stronger against political and market upheavals than if they had done it.
“Proforma companies will be more resilient and have the ability to better manage their current macro environment, including the ongoing threat of tariffs and product price volatility,” WhiteCap CEO Grant Fagerheim told analysts during a conference call Monday.
The deal makes Whitecap the seventh largest producer of Canadian oil by production, the largest landowner in Monny and Duverny in western Alberta, and the second largest producer of oil in Saskatchewan.
Under the all-stock deal announced Monday, Veren shareholders are expected to win a white cap of 1.05 shares per Veren share they own.
The combined company will be led by Whitecap’s existing management team under the name Whitecap.
The four directors will be on the Whitecap board of directors, including Veren’s current CEO Craig Bryksa.
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The transaction is expected to close by May 30th and requires approval from shareholders, courts and regulatory authorities. Once that is completed, current Whitecap shareholders own approximately 48% of the combined entities, while existing Veren shareholders own the remainder.
Fagerheim said the deal gives his company a leading position in Monny and Duverny shales in western Alberta, rich in precious natural gas fluids. It also increases the position of light oil in Saskatchewan.
“Our total company includes both office and field companies, as well as exceptional technical and support personnel from our experienced board of directors who prioritize sustainable and profitable growth, generating strong returns that combine shareholders,” Fagerheim said in a news release.
Bryksa says the deal is positioned to have a competitive advantage for the new company.
“Both companies have been strategic and disciplined in their approach to building and developing these great assets,” he told analysts.
“I truly believe that a total company with a stronger cash flow profile, strong financial position and a compelling return on capital is more competitive and fully set up to generate more shareholder value.”
Companies expect to be collecting more than $200 million in cost savings and efficiency.
Whitecap earns a total production volume of 370,000 barrels per day on contracts.
IT and Veren each had five years of plans to grow into 250,000 barrels of daily production. Analysts asked Fagerheim whether the 500,000 barrels first day target was plausible for Whitecap later in the decade.
“At this point, we assume that by bringing together the two companies together, we can achieve these types of growth metrics,” replied Fagerheim.
Veren, which changed its name from last year’s Crescent Point Energy, surged more than 16% on TSX to $8.19.
Whitecap stocks fell almost 15% to $7.99.
“We are actively looking at deals in some parts of the Western Canada sedimentary basin, including prizes from Alberta Monny and Duverny, to the extent that we provide shareholders of both companies with significant large entities that have interest in rather large entities.”
