Shareholders of Calgary-based Pipestone are set to vote on a proposal which would see privately-held Strathcona Resources buy them out in an all-stock deal, creating a combined company with an initial market capitalization of $8.6 billion.
The deal would also see Strathcona — one of North America’s fastest growing oil and gas producers — go public.
The combined company would be the fifth largest oil producer in Canada, according to a Pipestone news release, with current production of approximately 185,000 barrels of oil equivalent per day across the Cold Lake, Lloydminster and Montney oil-producing regions.
Pipestone’s board supports the deal, arguing the company’s shareholders will be gaining “ongoing exposure to one of the largest, well diversified, upstream producers in North America — one which has the capacity to grow its production significantly over the next decade.”
Strathcona Resources is owned by Calgary-based private equity firm Waterous Energy Fund. Through a series of recent acquisitions, the company has grown its production from 152 barrels of oil equivalent per day to more than 35,000 boe/d in just four years.
Strathcona’s executive chair Adam Waterous has said the plan is to continue building Strathcona within the public markets, and has stated his belief that now is an attractive time to be growing an oil and gas business in Canada.
But Atlanta, Georgia-based GMT Capital Corp., which controls about 19 per cent of Pipestone’s shares, opposes the deal. GMT has issued a dissident proxy circular urging other shareholders to vote against Strathcona’s offer, arguing it significantly undervalues Pipestone’s shares.
If Pipestone shareholders approve the deal Wednesday, they will receive 9.05 per cent of the equity in the merged company.
The merged company will retain the Strathcona Resources name and will continue to be led by Adam Waterous as well as current CEO Rob Morgan.
This report by The Canadian Press was first published Sept. 27, 2023.