Strathcona Resources to go public through $8.6B deal to buy Pipestone Energy

Calgary-based energy producer Strathcona said the deal will value the combined business at $8.6 billion, with the new company becoming the fifth largest oil producer in Canada.

Strathcona Resources Ltd. announced Tuesday it will go public through a deal to purchase oil and gas exploration company Pipestone Energy Corp. as part of a longer-term expansion push.

Calgary-based oil and gas producer Strathcona said the deal will value the combined business at $8.6 billion, with the new company becoming the fifth largest oil producer in Canada.

Strathcona positioned the all-share deal as a way to give Pipestone shareholders a meaningful ownership stake in a large, low-decline rate, oil-weighted producer.

Pipestone shareholders will hold about 9.05 per cent of the pro forma equity in the amalgamated company on a fully-diluted basis.

“We’ve been asked by a lot of folks, ‘Why go public?'” said Adam Waterous, executive chairman of Strathcona’s board of directors, on a conference call.

“When you’re private, it’s a much simpler life. There’s less reporting requirements — but I would also say that our view of actually being public is that the sector, in general, is undervalued.”

Waterous said that as the sector consolidates, some acquisition targets have signalled they are interested in partnering with Strathcona but want to take shares in a publicly traded company — “hence our desire to become publicly traded.”

“We’re not going public because we think, ‘Wow, look how great prices are.’ In fact, quite the opposite,” he said.