Seven Generations shareholders will receive 1.108 common shares of ARC. Credit: Anita starzycka from Pixabay.

ARC Resources has agreed to acquire rival Montney producer Seven Generations Energy for C$2.7bn ($2.2bn) to create Canada’s largest condensate producer and sixth-largest upstream energy company.

Under the deal, shareholders of Seven Generations will receive 1.108 common shares of ARC for each share held.

The combined entity will have a production capacity of more than 340,000 barrels of oil equivalent (boe) per day in 2021, including nearly 138,000 barrels per day of liquids and around 1.2 billion cubic feet (Bcf) per day of natural gas.

Upon completion of the deal, the combined company will operate under the brand name ARC Resources and will be headquartered in Calgary, Alberta.

ARC Resources said in a press statement: “The premier Montney land base of the combined company will comprise over 1.1 million net acres of Montney land and a deep inventory of high-return, de-risked core development opportunities.

“Free funds flow will be allocated towards the company’s highest-returning assets for development, debt reduction, and potential return of capital to shareholders through share buybacks and/or dividend increases.”

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Planned to be completed in Q2 2021, the deal is subject to shareholders’ approval of both the companies, regulatory approvals, and meeting of other customary closing conditions.

ARC Resources said in a press statement: “With its increased size and scale, the combined company expects to have improved access to capital and greater relevance in the global energy market.

“These enhancements are expected to support additional long-term market access and integration opportunities to increase revenue diversification and profitability.”

Following the completion of the merger, shareholders of Seven Generations will own a 51% stake in the combined company, while ARC Resources’ shareholders will have around 49% of the combined company.