Crescent Point Energy Corp. to Acquire Hammerhead Energy Inc.
Crescent Point Energy Corp. (TSX: CPG, NYSE: CPG) has entered into a definitive arrangement agreement to acquire all of the issued and outstanding Class A common shares of Hammerhead Energy Inc. (TSX: HHRS, NASDAQ: HHRS). The transaction, valued at approximately C$2.55 billion, will be completed through a plan of arrangement under the Business Corporations Act (Alberta) and is expected to close in late December 2023.
Strategic Rationale
The acquisition offers attractive value for Hammerhead shareholders, with a purchase price of C$21.00 per Hammerhead Share, representing a 17% premium over the five-day volume weighted average trading price. The transaction provides Hammerhead shareholders with continued ownership in Crescent Point, a leading Canadian producer, offering enhanced scale, asset diversification, liquidity in financial markets, and a long-term sustainable return of capital framework.
Increasing Size and Scale
The transaction will create the seventh-largest exploration and production (E&P) company in Canada, with a production weighted 65% to oil and liquids. Pro-forma Crescent Point production is expected to exceed 200,000 boe/d in 2024, with significant drilling inventory for long-term organic growth. Crescent Point will become the largest owner of land in the Alberta Montney and the condensate-rich Kaybob Duvernay play, further improving its cost of capital.
Transaction Approvals
The transaction is subject to customary closing conditions, including regulatory and stock exchange approvals, as well as approval by Hammerhead shareholders. Certain affiliates of Riverstone Holdings LLC, who own approximately 82% of the Hammerhead Shares, have entered into voting support agreements with Crescent Point and will vote in favor of the transaction. The Hammerhead Shares will be delisted from the TSX and NASDAQ upon closing.
The acquisition of Hammerhead Energy Inc. strengthens Crescent Point's position in the energy sector, providing increased scale, diversification, and growth opportunities.
The acquisition of Hammerhead Energy Inc. by Crescent Point Energy Corp. is a significant development in the energy sector. This move could potentially reshape the landscape for new businesses entering the industry. The combined entity will become the seventh-largest exploration and production company in Canada, providing a formidable competitor for new entrants. With a production weighted 65% to oil and liquids, Crescent Point's increased size and scale could potentially monopolize the market, making it difficult for new businesses to gain a foothold.
Furthermore, the acquisition will make Crescent Point the largest owner of land in the Alberta Montney and the condensate-rich Kaybob Duvernay play. This consolidation of resources could potentially limit the availability of prime drilling locations for new businesses, further increasing the barriers to entry.
However, the deal also presents opportunities. The enhanced scale and asset diversification of Crescent Point could stimulate industry growth, creating new avenues for businesses in ancillary sectors such as logistics, equipment supply, and maintenance services.
Overall, while the acquisition could present challenges for new businesses in the exploration and production sector, it also offers potential opportunities in related industries.
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