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Canadian Natural Inks Acquisition Deal With Painted Pony

Zacks Equity Research
·3 min read

Canadian Natural Resources Limited CNQ has reached an agreement to acquire Calgary-based natural gas producer Painted Pony Energy in an all-stock deal worth C$461 million. Further, the company is expected to assume Painted Pony’s total debt of approximately C$350 million.

Painted Pony will hold a special meeting this September to seek an approval of the deal by its shareholders.

Rationale Behind the Deal

Painted Pony’s assets are said to well complement Canadian Natural’s diversified portfolio. Moreover, the integration between the two companies is expected to make a significant impression on Canadian Natural’s natural gas assets and production base in its core operating areas as Painted Pony’s land and production are located in the same regions.

The takeover deal wherein the currently Zacks Rank #1 (Strong Buy) Canadian Natural will acquire Painted Pony’s outstanding shares worth 69 Canadian cents per share in cash will comprise the latter’s properties in Northeast British Columbia areas of Blair, Daiber, Kobes and Townsend. These areas jointly produce nearly 270 million cubic feet of natural gas and 4,600 barrels of natural gas liquids per day. You can see the complete list of today’s Zacks #1 Rank stocks here.

The transaction is expected to close by the end of the third quarter or the beginning of the fourth quarter of 2020 and is contingent on pending approvals and customary conditions.

The ongoing plunge in oil and natural gas prices due to the coronavirus-induced reduced demand dragged down energy stocks to record lows, prompting bigwigs to increase their holdings by acquiring smaller rivals at a relatively lower price. Canadian Natural is not the only company to ink a takeover deal in the middle of the prevalent pandemic.

Last month, Chevron Corporation CVX signed a contract to acquire Noble Energy NBL in an all-stock deal worth $5 billion. The impending buyout, which is one of the largest energy deal wins since the beginning of the COVID-19 outbreak, will also include Noble Energy's hefty debt load, which will be valued at approximately $13 billion. This plum deal in the U.S. energy sector has been snapped up a little more than a year this year after Chevron withdrew its acquisition offer for Anadarko Petroleum, overtaken by Occidental Petroleum’s OXY higher bid.

About Canadian Natural

Established in 1973, Calgary-based Canadian Natural is one of the largest independent energy companies in Canada engaged in the exploration, development and production of oil and natural gas. The company boasts a diversified portfolio of crude oil (heavy as well as light), natural gas, bitumen and synthetic crude oil (SCO).

Recently, Canadian Natural reported second-quarter 2020 adjusted loss per share of 47 cents, narrower than the Zacks Consensus Estimate of a loss of 56 cents, attributable to expanded total production, lower costs and higher natural gas price realizations. However, in the year-ago period, the company posted an adjusted profit of 65 cents per share. The year-over-year downside is due to lower softness in crude oil and NGLs price realizations.

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Noble Energy Inc. (NBL) : Free Stock Analysis Report
 
Chevron Corporation (CVX) : Free Stock Analysis Report
 
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
 
Canadian Natural Resources Limited (CNQ) : Free Stock Analysis Report
 
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Zacks Investment Research