Eagle Ford-focused Aurora Oil & Gas Ltd. (ASX: AUT.AX, TO: AEF.TO) agreed Feb. 6 to sell the company to Calgary’s Baytex Energy Corp. (NYSE: BTE) for US$2.35 billion (CA$2.6 billion), including assumption of CA$744 million in debt.
Australia’s Aurora has been focused on the Eagle Ford’s Sugarkane field, which is 97% held by production. It is developing 22,100 largely contiguous net acres there, and in the third quarter of 2013 produced 10 new net wells. The company’s acreage is located in Karnes, Atascosa and Live Oak Counties, Texas.
The deal requires Aurora shareholders' approval, court consent and an OK by U.S. and Australian regulatory officials. Shareholders would likely vote at the end of April or early May, Aurora officials said. Baytex’s offer was unsolicited and could be superseded by a more lucrative offer.
Baytex, a mid-cap company, will pay about $50,000 per acre after adjusting for net 22.5 thousand barrels of oil equivalent per day (MBOE/d). Aurora primarily relies on Marathon Oil Corp. (NYSE: MRO) to operate its holdings.
“The higher price versus about $30,000 per acre precedent (deals) likely reflects acreage quality and stage of development,” according to Tudor, Pickering, Holt & Co. “Investor interest has been somewhat mute, so perhaps this reinvigorates the play.”
James Bowzer, Baytex president and CEO, said the company will acquire premier acreage in the core of the Eagle Ford.
“The acquisition is an excellent fit with our existing business model and positions Baytex in another world-class oil resource play,” he said. “The acquisition will provide our shareholders with exposure to low-risk, repeatable, high-return projects with leading capital efficiencies.”
“This is a highly accretive transaction on a per-share basis to reserves, production and funds from operations,” Bowzer said. “The Eagle Ford play provides not only exposure to light oil, but also to Gulf Coast crude oil markets with established transportation systems. A portion of the produced crude oil benefits from Louisiana Light Sweet-based pricing, which currently trades at a premium to WTI.”
Aurora's fourth quarter 2013 gross production was 24,678 BOE/d (82% liquids), predominantly light, high-quality crude oil.
Aurora reported in November strong liquidity with US$106 million cash and an undrawn US$300 million credit facility. Average daily production hit a net 15,785 barrels of oil equivalent per day (BOE/d) in third quarter 2013, up 70% year-over-year (Y/Y).
Aurora 2014 Guidance Summary
Average Daily Production – BOE/d
Total Volumes - MMBOE
Capital Expenditures - US$MM
Drilling and completions
Facilities, land, and other
The company’s capital expenditures for 2013 were planned at up to US$495 million, including up to US$451 million in drilling and completions capital.
“While as a board we believe Aurora is well positioned and are confident in its future growth outlook, the board has undertaken a thorough assessment of the proposal from Baytex and believes it represents an attractive opportunity for shareholders to realize value at a significant premium to the current share price,” said Jon Stewart, Aurora's executive chairman.
Stewart said during a conference call that the price offered by Baytex represents a premium on Aurora’s stock prices of 52% from the week of Feb. 6, back to 41% from three months ago.
Baytex’ market cap is CA$5.1 billion that operates in the Bakken/Three Forks and other areas. Stewart said Baytex is raising CA$1.3 billion for the deal, but has committed its debt facilities to the transaction.