PKN ORLEN, through its subsidiary ORLEN Upstream Canada, entered into an agreement whereby the process of acquisition of 100% of shares in Kicking Horse Energy commenced. The equity purchase price is approximately CAD 293 million (ca. PLN 842 million), which represents CAD 4.75 (PLN 13,65) per share. The transaction will be finalised upon the fulfilment of all the terms and conditions of the agreement. The planned date for the transaction closing in 4Q, 2015.
The acquisition of Kicking Horse Energy is in line with PKN ORLEN’s strategy aimed at further investment in attractive oil markets in low-risk countries. The transaction will enable ORLEN to expand its portfolio of exploration and production assets in Canada, further strengthening the Company’s upstream segment’s production and resource potential. The total transaction value representing the enterprise value, including the assumption of Kicking Horse’s net debt, working capital and other adjustments is CAD 356 million (ca. PLN 1 023 million).
“The experience gained during previous acquisitions makes it possible to achieve upstream synergies. ORLEN Upstream Canada began operations on hydrocarbon deposits in Alberta two years ago, following the acquisition of TriOil Resources. Since that time, we have been able to significantly increase our resource base and production volumes. This new transaction will considerably strengthen our position in this area”, said Jacek Krawiec, President of the Management Board of PKN ORLEN.
Kicking Horse Energy’s key assets are situated in the region of Kakwa, Alberta, and are characterised by high production potential. The field economics in this region is one of the highest in Western Canada: it carries low risk and it ensures good prospects for growth for the ORLEN Group. According to the assessment performed as part of the due diligence process, upon the execution of the transaction, ORLEN expects to increase its daily production by over 4,000 barrels of oil equivalent (boe), and to expand its resource base by approx. 30m boe of 2P reserves.
Having consulted its financial and legal advisors, the Board of Directors of Kicking Horse Energy has unanimously acknowledged the acquisition agreement to be in the best interest of Kicking Horse Energy and beneficial to its shareholders.
The agreement to purchase all shares will be finalised by the parties if it is approved by at least two-thirds of the votes at the Kicking Horse Energy General Meeting. For the transaction to be closed, a number of additional conditions which normally apply to such arrangements in the Canadian legal system will also have to be satisfied. The transaction closing is expected in Q4 2015.
In line with its declarations, the Company is consistently adding new assets to its upstream portfolio in Poland and Canada with a view to diversifying exploration risk. Amid sustained pressure on crude oil prices, steps have been taken to optimise capital expenditure supporting organic growth in the upstream segment in 2015. However, a standby capex on acquisition projects could be utilised provided the Company’s financial condition is satisfactory and attractive acquisition opportunities in Poland or abroad have been identified. As both these criteria have been met, a decision has been made to acquire Kicking Horse Energy. The transaction does not affect PKN ORLEN’s strategic objectives for the dividend policy, and the Company’s financial foundations remain unchanged.
In Canada, PKN ORLEN currently holds promising areas within the Cardium, Dunvegan and Montney formations, producing over 7,000 boe a day, with 2P reserves at approximately 50m boe.