Bellatrix’s big move
The company makes a series of transactions that pave the way towards a very promising future
When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at firstname.lastname@example.org
by Max Fawcett
Bellatrix Exploration (TSE:BXE) made a series of transactions on Tuesday that will fundamentally reshape the company and its prospects going forward. First, it announced that it was buying Angle Energy (TSE:NGL), a junior light oil producer that’s been on the block for a while, in a deal worth $576 million. The buyout offer represents a 20 per cent premium over where Angle’s shares were trading, but for longer-term investors the premium isn’t nearly as rich. At the proposed purchase price, Angle shares are actually down three per cent on a year over year basis, and down more than 62 per cent from the highs they reached in July of 2011.
The story’s a happier one for Bellatrix shareholders, who not only see their company add some light oil and liquids rich natural gas assets, but also $415 million worth of financing to help pay for the deal. In addition to bought deal financing worth $175 million, it announced a $240 million joint venture with a South Korean partner – a different one than the company it partnered with on the same assets last year. That deal fell apart when the previous South Korean partner failed to get the necessary approvals from its government. One assumes that the new dance partner, Seoul-based Troika Resources Private Equity Fund, won’t step on its own feet in quite the same way. Under the terms of the new deal Troika (through a Canadian subsidiary called TCA Energy) will chip in $120 million to drill and complete 63 wells on Bellatrix’s Cardium acreage by the end of 2014. In return for that investment, it will receive a 35 per cent working interest in the wells until it earns back its original investment plus a 15 per cent premium, after which point its interest is reduced to 25 per cent.
This isn’t the only JV that Bellatrix is engaged in right now, and it’s clear that with the addition of Angle’s acreage it’s a strategy that it’s going to continue to turn to. Just a few months ago, back in June, it announced that a private investment fund based in Calgary called Grafton Energy would invest up to $250 million in a joint venture, while in August it announced still another JV – with another South Korean consortium – worth $200 million. Ray Smith, the president and CEO of Bellatrix, told the Calgary Herald that, “the three joint ventures together will use about 15 per cent of our inventory. On the other hand, the acquisition is doubling our land in west central Alberta and, on a first-blush look, adding over 500 locations on our two main play trends in the Cardium and lower Mannville.” In other words, there’s still plenty of room to run (and perhaps further joint ventures to be signed) in the future.
Painted Pony Petroleum (TSE:PPY), meanwhile, graduated to the big board, trading its listing on the Venture Exchange for one on the Toronto Stock Exchange proper. The company will trade under the same ticker symbol, and AltaCorp Capital’s Jeremy McCrea thinks investors will, in time, return to it. “The current weakness in the stock appears to be from a general shift to oil-weighted names with AECO differentials under pressure however as winter approaches and management provides further clarity on spending into 2014, we expect investors to return to this premium name.”