On Monday, Crescent Point Energy (NYSE:CPG) Corp. (TSX: CPG; NYSE: CPG) announced its plans to acquire Hammerhead Energy Inc. (TSX: HHRS; NASDAQ: HHRS), a company which had demonstrated significant organic growth and superior operational results since its public listing in early 2023. The acquisition, valued at C$21.00 per share, will be executed through a combination of cash and Crescent Point common shares.
The agreement, under the Business Corporations Act (Alberta) via a plan of arrangement, will see each Hammerhead share exchanged for C$15.50 in cash and C$5.50 in Crescent Point common shares. This transaction is expected to close in late December 2023, transforming Hammerhead from a 1,100 boe/d producer into part of a larger enterprise with lower capital costs.
The acquisition comes on the heels of Hammerhead's record Q3 2023 financial results. The company maintained its two-rig program targeting Montney light oil at North Karr, and infrastructure expansion at South Karr within time and budget constraints. The first multi-well pad at South Karr, including three new Lower Montney wells, is expected to be operational upon the completion of South Karr facilities in December. Additionally, the North Karr 10-14, part of the 12-well pad, achieved a record low well cost of $7.9 million per well.
Hammerhead's CEO, Scott Sobie, noted that the new wells exceeded expectations leading to record cost outcomes. The company also saw a significant increase in public float following the redemption of Public Warrants that led to the issuance of 4,630,591 Hammerhead Shares.
The acquisition deal requires approval from shareholders, court, and regulatory bodies. Riverstone Holdings LLC affiliates, who own about 82% of Hammerhead shares, have agreed to vote in favor of the transaction. The board of directors unanimously determined the transaction is fair and in shareholders' best interests, recommending a favorable vote.
Advisors for the deal include CIBC Capital Markets as Financial Advisor, legal counsel from Burnet Duckworth & Palmer LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP. ATB Capital Markets and Stifel Canada serve as Strategic Advisors. Peters & Co. Limited advises the Special Committee of the Board.
InvestingPro Insights
As Crescent Point Energy Corp. prepares to acquire Hammerhead Energy Inc., it's worth taking a closer look at some key data and insights from InvestingPro.
InvestingPro Data indicates that Crescent Point Energy Corp. has a market capitalization of $4190.0M and a P/E ratio of -6.83 as of the last twelve months of Q3 2023. Despite a challenging earnings environment reflected in a declining trend in earnings per share, the company has been profitable over the last twelve months and has been able to maintain dividend payments for 21 consecutive years, a promising sign for potential investors.
InvestingPro Tips suggest that while the company's revenue growth has been slowing down recently, it has been trading near its 52-week high. This, coupled with the fact that the company's stock generally trades with low price volatility, could indicate a stable investment opportunity.
InvestingPro offers additional tips and insights for various other companies to help investors make informed decisions. For instance, there are currently more than 10 additional tips listed for Crescent Point Energy Corp. on the InvestingPro platform. These insights can provide valuable context and guidance, especially in a dynamic and evolving market.
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