Persist Oil and Gas, Inc. (“Persist”) and Dienerian Resources Inc. (“Dienerian”) announced that they have entered into a definitive agreement under which Persist and Dienerian have merged in an all-stock transaction. Dienerian was formed in 2017 with a commitment from Siguler Guff, the company’s largest investor, to develop, build infrastructure, and begin delineation of its core Wild River area in the liquid-rich Montney formation.
Concurrent with the merger, Siguler Guff made a preferred equity commitment of approximately C$40 million in the pro forma combined company. Under terms of the agreement, Persist’s executive team will lead the combined company with Siguler Guff holding half of the seats on the Board of Directors.
The transaction helps strengthen Persist’s position as an emerging player in the southern Alberta Mannville formation (with “stacked” multiple pay zones) oil development, with a pro forma acreage footprint of over 220,000 net acres, which now includes about 60,000 net acres of liquid-rich Montney land, and production of approximately 4,250 barrels of oil equivalent per day. This asset base combined with the new preferred equity commitment enables the combined company to sooner reach a critical mass of self-sustaining free cash flow generation.
PR Panigrahi, Managing Director and Head of Energy Investments of Siguler Guff, said: “We are very excited to partner with Persist in its next phase of growth. This merger and consequent investment demonstrate Siguler Guff’s ongoing commitment to providing flexible capital solutions to the exploration & production sector.”
Following the success of its two most recently drilled and completed wells in the Basal Quartz formation, that averaged a maximum initial production rate of 706 barrels of oil equivalent per day, Persist will use the cash flow from operations and the new preferred equity commitment to continue to develop its core asset in the southern Alberta Mannville Stack oil fairway, where it recently spud the first well of its summer development program.
Mass Geremia, President and CEO, and Director of Persist, added, “Our new partnership with Siguler Guff could not have come at a better time. The addition of Dienerian’s assets and new preferred equity commitment allows Persist to accelerate its development plans and substantially increase shareholder value over the next two years.”
KEY HIGHLIGHTS
- Increases Size and Scale: The transaction increases production and combines a large land position with existing infrastructure in the southern Alberta Mannville Stack oil fairway with a significant acreage footprint in the liquid-rich Montney formation. Both areas are each capable of delivering significant production growth.
- Diverse Portfolio of High-Return Inventory: Persist’s lower-cost, oil-weighted Southern Alberta drilling inventory combined with Dienerian’s extensive Montney liquid-rich natural gas drilling inventory offers flexibility in capital allocation depending on commodity price environment and other macroeconomic factors.
- Cost Synergies: Immediate operational and general & administrative synergies were realized in conjunction with closing, including consolidation of corporate headquarters and elimination of redundancies.
- Strong Balance Sheet: Persist’s robust cash flows from operation combined with the new preferred equity commitment has resulted in substantial deleveraging and increase in liquidity. High working capital level combined with increasing debt capacity will provide the combined company with ample capital for growth over the next two years.
- Tax Pools: Together, Persist and Dienerian’s sizable tax pools can create a highly efficient structure with a long runway of financial benefits given the current industry outlook.
- Asset Retirement Obligations: Using the Alberta Energy Regulator’s Licensee Liability Rating (“LLR”), the combined company’s LLR is at 3.11 as of August 2023, which includes a relatively high proportion of facility liability and should only increase going forward as future drilling increases the combined company’s production.
ADVISORS
Integral Capital Markets served as financial advisor and Gowling WLG served as legal advisor to Persist. Borden Ladner Gervais LLP served as legal advisor to Dienerian. CIBC Capital Markets served as financial advisor and Stikeman Elliott LLP served as legal advisor to Siguler Guff.
