Tourmaline Completes $1B Acquisition of Crew Energy

Tourmaline Oil Corp. has closed its acquisition of natural gas producer Crew Energy Inc., which focuses on British Columbia’s Montney play.

Tourmaline acquired all of the issued and outstanding common shares of Crew in exchange for 18.778 million Tourmaline common shares and the assumption of net debt of approximately $167.32 million (CAD 230 million), including all transaction costs, for total consideration of approximately $1.02 billion (CAD 1.4 billion).

The acquisition “represents a further important component of the company's continuing NEBC [North East British Columbia] consolidation strategy that complements the long-term EP organic growth plan,” Tourmaline said in a news release.

Tourmaline outlined that the acquisition provides a significant high-quality addition to its South Montney asset base and is immediately accretive to the company's key financial and reserve metrics.

The acquisition includes existing low-decline average base production of 28,000 to 30,000 barrels of oil equivalent (boepd), externally and independently evaluated proved and probable (2P) reserves of 473.2 million barrels of oil equivalent (boe), and an extensive drilling inventory, including over 700 Tier 1 locations (246 net Montney locations booked in the Sproule Report 2P reserve category).

Further, the Crew assets are immediately adjacent to Tourmaline's existing South Montney operated complex, with multiple facility synergies and cost reduction opportunities already identified, the company noted.

Crew's Groundbirch development project, including the planned and permitted 15-25 electrified deep cut gas processing facility, has the potential to more than double the existing Crew production base, according to the release.

Tourmaline said it intends to proceed with the Groundbirch project within the next five years, with specific timing to be determined over the next year.

Calgary, Alberta-based Tourmaline announced the transaction in August.

"Dale and his team at Crew have done a tremendous job over the past 21 years assembling one of the premier, concentrated Montney asset bases in NEBC, with significant upside. Tourmaline's scale, execution capability and ability to generate strong FCF [free cash flow] in all parts of the commodity cycle will allow Crew shareholders to realize the material embedded upside on an accelerated timeline," Tourmaline President and CEO Mike Rose said in an earlier statement.

Crew in May reported $10.6 million in net profit for the first quarter, versus $41.3 million for the corresponding quarter in 2023. In its earnings release, Crew said its average production for the quarter was 29,510 boepd or 177 million cubic feet of natural gas equivalent (MMcfe). The results are in line with its previous quarterly guidance of 29,000 to 31,000 boepd.

Meanwhile, Tourmaline has entered into an agreement to sell a gross overriding royalty (GORR) interest to Topaz Energy Corp. on the recently acquired Crew lands, the Bonavista Energy lands acquired in 2023, and new Deep Basin, Peace River High, and NEBC lands acquired by Tourmaline over the past two years, for total cash consideration of $202.39 million (CAD 278.2 million).

Consistent with Tourmaline's existing GORR agreements with Topaz, Topaz will receive a GORR of 3 percent on natural gas and 2.5 percent on crude oil and condensate. The transaction is expected to close on November 1.

The proceeds from the Topaz transaction will be used to reduce bank indebtedness and allow the company to continue to execute on its consolidation strategy while maintaining low leverage, Tourmaline said.

To contact the author, email rocky.teodoro@rigzone.com