Three Canadian juniors merge into one

20 December 2012 18:04 GMT

Pace Oil & Gas, AvenEx Energy and Charger Energy - each based in Calgary and listed in Toronto - will call the merged company Spyglass Resources.

The combined company is expected to produce about 18,000 barrels of oil equivalent per day, with 57.5 million boe in total proved reserves. It will pay a monthly dividend of three Canadian cents with a payout of 35% to 40% of cash flow.

Spyglass will be led by Tom Buchanan, current chief executive of Charger and formerly of Provident Energy Trust.

It plans to spend between C$80 million and C$90 million on operations in 2013, focussed primarily on light-oil development. Thirty percent of the spending will be dedicated to the Halkirk-Provost Viking prospect. Another 20% will go towards the Pekisko and other zones in southern Alberta, with another fifth of the capex earmarked for Randell Slave Point and Gilwood. About 10% of the budget will go toward the Pembina Cardium.

“The combined asset base features mature, low-decline properties and a balanced commodity profile coupled with the light-oil development opportunities needed to sustain the model," Buchanan said in a statement. Spyglass will have undeveloped acreage totalling 645,000 acres.

In conjunction with the merger, AvenEx agreed to sell off its Elbow River marketing business to an unnamed buyer for $80 million. Closing of the merger is subject to the closing of that sale (and other regulatory approvals). Both are expected to come in February 2013.

The merger agreement calls for 1.3 Spyglass shares to be exchanged for each Pace share, one Spyglass share for each AvenEx share, and 0.18 Spyglass shares for each Charger share. The deal values Pace shares at C$4.32 apiece, AvenEx shares at C$3.32 each, and Charger shares at 60 Canadian cents each, according to a statement.

Shareholders of the companies will meet in February to vote on the merger, which requires two-thirds approval to pass.

Spyglass will have about 129 million common shares outstanding upon completion of the merger. The company will be listed on the Toronto Stock Exchange under the symbol SGL.