In early July, Mapan Energy and Paris Energy announced a deal worth $132.5 million that involved purchasing oil and gas assets in the Deep Basin of West Central Alberta and Northeastern British Columbia from Shell Canada. On July 31st the transaction was completed and details of the deal came to light.
Mapan Energy, which was a private company until recently, issued shares to acquire Paris Energy. Mapan raised the funds to acquire the assets and its management team is now leading Paris Energy.
Mapan’s team now has a vehicle for which to restructure, raise future funds and acquire assets. It has been reported that a name change is also forthcoming in the near future.
This acquisition strategy has been a trend of late on the TSX Venture. An all-star cast of successful oil and gas developers, take over a vehicle on the Venture that involves the completion of a corporate transaction, a large asset acquisition and a new management team taking the helm.
PanTerra Resource Corp. is a perfect example and followed a very similar road. The company is now one of the most liquid and well known stocks on the TSX Venture.
Paris’ first day of trading, August 6th, saw 32.8 million shares trade hands between $0.17 and $0.21 as investors got their first chance to take a stake in the newly branded oil and gas company.
Roughly $18 million worth of stock has exchanged hands since August 6th as new management reconstitutes the Board and takes significant positions in the company. The company’s shares closed at $0.18 per share on roughly 1 million shares traded Wednesday.
The leader of Mapan Energy is Richard Walls who led South-American-focused C&C Energia Ltd. through to its sale to Pacific Rubiales Energy in a stock deal worth $626 million in 2012. He’s brought Jennifer Dugdale with him from C&C who is now serving as Mapan’s CFO.
Details of Mapan’s asset acquisition in Alberta and BC were put forth in a July 31st press release in a very succinct and direct format. Below is a short excerpt highlighting the acres and current production.
“Pursuant to the Asset Acquisition, Mapan acquired production, lands and P&NG rights in two areas of the Alberta and British Columbia Deep Basin comprised of 203,200 gross acres (162,000 net acres) of which approximately 120,000 net acres consist of undeveloped lands. Average production from the lands, for the period January 1 to June 1, 2014, was approximately 7,000 barrels of oil equivalent per day (“BOED”), of which 90% is natural gas production. Production for the full year 2014 is expected to average approximately 6,520 BOED.”
Click here to read the entire press release.
Why the heavy natural gas weighting?
Paris Energy’s new leader, Richard Walls, has taken some criticism due to the fact his acquisitions are largely natural gas focused.
Natural gas was reborn in 2013 as it surged to multi-year highs above $6, but has since been fading. Natural gas prices have lost more than 20% in the past few months and hit a 3-week low on Friday.
Natural gas per million British thermal units dipped to $3.83 on the New York Mercantile Exchange for September 14th contracts.
In a quote derived from the Wall Street Journal, Brian Bradshaw, a portfolio manager who oversees energy-derivatives trading at $1 billion fund firm BP Capital in Dallas, stated, “We think you’re going to have plenty of gas for the winter unless you’ve got some kind of extreme weather event, which, how likely is that?”
Below is an excerpt taken from the Calgary Herald which document’s Walls’ confidence surrounding his company’s decision to invest heavily in nat gas assets in Alberta and BC and his faith in natural gas prices moving forward.
Richard Walls defended the decision to buy assets with a high gas weighting. Although a cold winter drew down North American reserves and boosted natural gas prices recently from sub-economic lows of the past few years, analysts say a glut of U.S. shale gas could return to again weigh on prices.
“I like gas,” Walls said. “I think we’re going to have another good cycle with gas. And our acquisition metrics were favourable so it was a good buy, a good set of assets with good upside.”
Click here to read the entire article published in early July.
Paris Energy definitely has a pep in its step these days, with Mapan Energy’s management team at the helm and a name change expected following the next shareholder meeting. Its acquisition in the Deep Basin of West Central Alberta and Northeastern British Columbia is a bet that natural gas prices will stabilize and rise in the long-term.
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