Offshore Technology

Daily Newsletter

09 August 2023

Daily Newsletter

Deal Focus: Strathcona Resources to acquire 100% of Pipestone Energy

Strathcona will acquire 100% of Pipestone Energy in an all-share combination. The resultant company will continue as Strathcona Resources.

Each week, Offshore Technology’s editors select a deal that illustrates the themes driving change in our sector. The deal may not always be the largest in value or the highest profile, but we select it because of what it tells us about where the leading companies are focusing their efforts, and why. We pick apart the deal itself and the industry theme behind it. This new, thematic deal coverage is driven by our underlying Disruptor data, which tracks all major deals, patents, company filings, hiring patterns and social media buzz across our sectors.

The deal

Canada’s Strathcona Resources has announced the 100% purchase of fellow Canadian oil and gas developer Pipestone Energy in an all-share combination. The two merged entities will continue as Strathcona Resources Ltd.

Why it matters

Upon completion of the transaction, the merged company will become the fifth-largest liquids producer in Canada by production and reserves, as per Pipestone’s estimates. The company expects to produce as much as 185,000 barrels of oil equivalent per day (boepd). The majority of this is oil and condensate that had previously been concentrated across the Cold Lake Thermal, Lloydminster Heavy Oil and Montney projects.

Strathcona’s purchase comes with Pipestone’s Montney operations, namely its Wembley project. A “world-class asset”, Strathcona can now consolidate its operations in the area with the addition of Wembley’s 90,000 acres to support its own operations in the region, which produces 45% of Canada’s natural gas.

Rob Morgan, Strathcona president and CEO, said: “We are excited about the acquisition of Pipestone, which fits hand-in-glove with our existing condensate-rich Alberta Montney properties and provides a natural hedge to the natural gas and condensate consumed in our Cold Lake Thermal and Lloydminster Heavy Oil operations.”

Pipestone CEO Gord Ritchie stated: “We are excited to be combining Pipestone with Strathcona, creating a new Canadian oil and gas champion with long-life reserves, significant growth potential and low sustaining break-evens.”

Ritchie said that in four years, Pipestone has grown from producing 152 boepd to 35,162 boepd. Pipestone’s interim CEO, Dustin Hoffman, added that: “The acquisition of Pipestone by Strathcona reflects the successful culmination of growing and delineating our asset base over the past four years.”

The detail

Upon completion, Pipestone shareholders will receive 9.05% of Strathcona’s equity, equating to 0.067967 Strathcona shares per Pipestone share.

ESG 2.0 marks a shift towards stricter environmental rules

ESG is moving into a different era, which we call ESG 2.0. While ESG 1.0 was driven by voluntary corporate action, spurred by pressure from activist consumers and investors, ESG 2.0 is being driven by a new wave of government policies. The EU has taken the regulatory lead, with rules introduced or in the pipeline that will price emissions, regulate the use of the terms ‘ESG’ and ‘sustainability’ in marketing materials, and make ESG reporting mandatory. The US has taken a different approach, favoring less regulation and more financial support in the form of tax breaks for clean industry (renewables plus nuclear and hydrogen). China is planning to expand its emissions trading system to more sectors, decarbonize its heavy industry, and ramp up its use of renewables. The new policy direction is mainly motivated by the ambition to hit net zero emissions targets. But on top of this, governments are now competing for clean industry and trying to challenge China’s leadership on the production of the world’s green technologies such as solar panels and batteries, as well as the production and refinement of materials needed for energy transition such as lithium. These driving forces are leading to policy that will impact every sector, not just heavy industry, and will keep ESG near the top of the regulatory agenda over the longer term.