Consolidation in the Oil Patch: Whitecap Buys Midway for $550M

Late last month, Whitecap Resources announced its acquisition of Midway Energy for approximately $550.3 million, in a deal that shows how oil and natural gas liquids-focused exploration and production (E&P) companies are consolidating in the oil patch.

Justin Ferrara of Norton Rose Canada in Calgary, who is leading the legal team for Whitecap, explains:

A number of junior E&P companies are pursuing a sale strategy rather than continuing to grow, because it is becoming increasingly difficult to operate in the current environment due to the relative high cost of capital for juniors and increasing costs associated with new drilling technologies such as multistage fracking.

Interestingly, Whitecap recently completed two other corporate acquisitions: the $97.8 million purchase of Compass Petroleum (closed February 10) and the $223 purchase of Spry Energy (closed April 20, 2011).

According to Ferrara,

Companies like Midway are opting to sell to buyers that can better withstand the risks associated with exploring and developing new plays. Those companies have the ability to raise funds at a lower cost of capital.

Midway’s assets are predominantly located in the Garrington area of Alberta and focused in the Cardium formation. Whitecap adds these assets to its existing horizontal drilling operations in the Pembina Cardium play.

Norton Rose Canada LLP is representing Whitecap Resources Inc. with a team led by Justin Ferrara that includes partners Dion Legge, Kirsty Sklar, John Carleton and Alan Harvie, and associates Brad Schneider and James Jerrard.

Burnet, Duckworth & Palmer LLP acts for Midway Energy Ltd. with a  team that includes Shannon Gangl and Lindsay Cox (securities), Jody Wivcharuk (competition), Heather DiGregorio (tax),  Dan McDonald, QC (litigation), and Richard Smith (employment).

The acquisition is expected to close on or around April 25, 2012.

On its acquisition of Compass Petroleum Ltd., which closed on February 10, 2012, Whitecap was represented by Burnet, Duckworth & Palmer LLP, with a team that included Grant Zawalsky, Shannon Gangl, Syd Abougoush and Bronwyn Inkster (corporate/securities), Kirk Lamb (tax), Jody Wivcharuk (competition) and Gina Ross (employment).

Compass Petroleum was represented by Bennett Jones LLP, with a team that included Nick Fader, Paul Barbeau and Matt Olson (corporate/securities), Darcy Moch (tax), Tony Friend (litigation), Beth Riley (competition) and John Gilmore (employment).

– Gena Smith

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