Veren, Whitecap Resources combine in $15B transaction

Whitecap Resources and Veren (VRN) announced a strategic combination to create a light oil and condensate producer with concentrated assets in the Alberta Montney and Duvernay. The combined company will be the largest Alberta Montney and Duvernay landholder, a prominent light oil producer in Saskatchewan and will leverage the combined asset base and technical expertise. The companies have entered into a definitive business combination agreement to combine in an all-share transaction valued at approximately $15B, inclusive of net debt. Under the terms of the agreement, Veren shareholders will receive 1.05 common shares of Whitecap for each Veren common share held. The combined company will be led by Whitecap’s existing management team under the Whitecap name with four Veren directors to join the Whitecap board of directors, including the current president and CEO of Veren, Craig Bryksa. The transaction is expected to close before May 30. The combined company’s production forecast at closing is 370,000 boe/d and based on commodity prices of $70/bbl WTI and C$2.00/GJ AECO, the forecast annualized funds flow is $3.8B. After annual capital investments of $2.6B, free funds flow is forecast at $1.2B. Detailed 2025 guidance will be provided on close of the transaction. Concurrent with entering into the agreement, Whitecap has received commitments from National Bank of Canada and the Toronto Dominion Bank with National Bank Financial Markets and TD Securities, as joint bookrunners and co-lead arrangers, for a $500M increase to the company’s existing committed $2B credit facilities as well as commitments for an additional fully committed $1B credit facility from NBC, TD, Bank of Montreal, and Bank of Nova Scotia as Joint Bookrunners. On a combined basis, these facilities provide for $3.5B in total credit capacity available to Whitecap on closing to support the combination. The companies have entered into the agreement to combine in an all-share transaction valued at approximately $15B, inclusive of net debt. Under the terms of the agreement, Veren shareholders will receive 1.05 common shares of Whitecap for each common share of Veren held. Following the close of the transaction, Whitecap shareholders will own approximately 48% and Veren shareholders will own approximately 52% of the total common shares outstanding of the combined company. It is anticipated that normal course monthly dividend payments will continue to be made by Whitecap and that Veren’s first quarter dividend will be paid in the normal course, after which Veren will not pay dividends, provided that, in the event that the transaction closes after May 31, Veren shareholders will be entitled to a special dividend comprised of a monthly dividend declared by the Veren board and paid by Veren in respect of the month of May and every calendar month thereafter in which the effective date does not occur, in the amount of $0.03833 per Veren share. The transaction is structured through a plan of arrangement in respect of the securities of Veren under the Business Corporations Act and is subject to the approval of at least two-thirds of the votes cast by holders of Veren common shares. The issuance of Whitecap common shares pursuant to the arrangement is subject to the approval of the majority of votes cast by holders of Whitecap common shares in connection with the transaction. Closing of the transaction will be subject to approval of the arrangement by the Court of King’s Bench of Alberta as well as other customary closing conditions, including the receipt of customary regulatory and Toronto Stock Exchange approvals. The transaction is expected to close before May 30. An independent special committee of the board of directors of Veren was formed to consider and review the transaction on behalf of the Veren board of directors. Based on, among other things, the unanimous recommendation of the special committee, the board of directors of Veren unanimously determined that the transaction and the entering into of the agreement are in the best interests of Veren, the transaction is fair to the Veren shareholders and approved the agreement, and has unanimously recommended that Veren shareholders vote in favor of the resolution to approve the transaction at the special meeting of Veren shareholders to be held on or about May 6. The board of directors of Whitecap unanimously determined that the transaction and the entering into of the agreement are in the best interests of Whitecap, the transaction is fair to the Whitecap shareholders and approved the agreement, and has unanimously recommended that Whitecap shareholders vote in favor of the resolution to approve the issuance of Whitecap common shares pursuant to the transaction at the special meeting of Whitecap shareholders to be held on or about May 6. A joint information circular, which will include details of the transaction, is expected to be mailed to Whitecap and Veren shareholders in mid-April.