Tamarack Valley Energy (TVE.TO) on Tuesday said it agreed to acquire Headwater Exploration (HWX.TO) in an all-stock transaction valued at a combined CA$10 billion, creating a larger oil producer focused on the Clearwater heavy-oil region in Alberta.
Under the agreement, Headwater shareholders will receive one Tamarack share for each Headwater share held. Tamarack will issue about 237.8-million shares to acquire all outstanding Headwater shares. Following completion of the transaction, existing Tamarack shareholders will own about 66.5% of the combined company, while Headwater shareholders will own about 33.5%.
The combined company will be led by Tamarack's current management team and is expected to have run-rate pro forma Clearwater production of more than 80,000 barrels of oil equivalent per day, which it said will make it the largest producer in the Clearwater play, with 3,000 identified drilling targets. It also expects CA$50 million per year of synergies.
Tamarack expects the acquisition will boost its free funds flow per share by about 10% and lower its breakeven production costs to US$37.00 per barrel.
The companies said the combined entity is expected to have more than $50 million of net cash and more than $1.2 billion of available funding.
In connection with the transaction, Tamarack plans to increase its quarterly dividend by 20% to $0.06 per share from $0.05 per share, or $0.24 per share on an annualized basis, beginning in December.
Tamarack said current president Steve Buytels will be promoted to chief executive and join the board of directors of the combined company. Brian Schmidt, Tamarack's founding CEO since August 2009, will transition to executive chair of the board. The appointments are expected to be effective Jan. 1, 2027.
Tamarack also plans to spin out the combined company's holdings in Alberta's Mannville-stack region as well as Headwater's New Brunswick McCully gas asset, with shareholders receiving 0.33 shares in the company called Tributary Exploration. Headwater shareholders will also receive 0.2 of a 60-day warrant to buy a Tributary share for CA$0.42. The spin-company will be managed by Headwater's current management team.
Tamarack shares closed down CA$0.17 to CA$13.36 Friday on the Toronto Stock Exchange, while Headwater closed down CA$0.05 to CA$14,22.