Baytex Energy announced Tuesday that it is expanding its presence in the Eagle Ford with an agreement to acquire pure-play Ranger Oil for $2.5 billion. The pricing includes debt of $650 million at closing, which is expected to come in late Q2 of 2023.
Baytex president and CEO Eric T. Greager described the deal as “strategic.”
“We are acquiring a strong operating capability in the Eagle Ford, on-trend with our non-operated position in the Karnes Trough and driving meaningful per-share accretion on all metrics,” Greager said.
Vinson & Elkins and the Canadian firm of Burnet, Duckworth & Palmer are serving as Baytex’s legal counsel on the deal. Kirkland & Ellis and the Canadian firm of Stikeman Elliott are advising Ranger.
The Vinson & Elkins team was led from Houston by partners Mike Telle and Lande Spottswood and senior associate Yong Eoh with assistance from associates Mary Busse, Leah Powers, Mimi Nguyen and Josh Rutenberg. Also advising were partner Bryan Loocke on energy transition; partners Jason McIntosh, David Peck, and Natan Leyva, counsel Allyson Seger and associates Miron Kimkowski, Maddie Brown and Steve Campbell on taxation; partner David Wicklund and associates Natalie Harrison and James Payne on finance; partner Joo Lee and associates Mary Daniel Morgan and Kenneth Strain on executive compensation; partner Becky Baker and associate Ryan Penner on employment issues; partner Hill Wellford and associate Ryan Will on regulatory issues; counsel Rajesh Patel and associate Haley Titcomb on intellectual property; partner Matt Dobbins and associate Alyssa Sieja on environmental concerns; counsels Brian Howard and Elizabeth McIntyre and associate Pete Thomas governmental issues; partner Paul Heath, senior associate Mike Garza and associate Eli Medina on restructuring; partner Prentiss Cutshaw and associates Ken Adler and Catherine Callahan on real estate; and counsel Caroline Bailey on capital markets.
Likewise Kirkland & Ellis advised Ranger with a team also led from Houston by corporate partners Sean Wheeler, Debbie Yee and Camille Walker with tax partners David Wheat and Bill Dong; executive compensation partners Rob Fowler and Stephanie Jeane; oil & gas partners Anthony Speier and R.J. Malenfant; capital markets partners Julian Seiguer and Anne Peetz; and debt finance partner Rachael Lichman.
On the financial side of the deal, CIBC Capital Markets and RBC Capital Markets are acting as financial advisors to Baytex, with Scotiabank as strategic advisors.
For Ranger, BofA Securities and Wells Fargo are advising on finance. CIBC, RBC, and BNS are acting as joint bookrunners on a revolving credit facility and term loan, while CIBC and RBC are acting as joint bookrunners on the bridge loan.
Latham & Watkins represents CIBC and RBC in the financing commitment related to the bridge facility with an Austin-based team led by partners David Miller and Sam Rettew, with associate Manu Vadlamudi.
Under the terms of the Agreement, Ranger shareholders will receive 7.49 Baytex shares plus $13.31 cash, for each Ranger common share, for total consideration of approximately $44.36 per share. This represents a 7.6% premium based on a five-day volume weighted average price of Baytex.
Baytex says the transaction nearly doubles both its EBITDA and free cash flow, and is accretive on key share metrics, allowing an immediate step-up in direct shareholder returns, including the introduction of a dividend and increased share buybacks.
Baytex estimates 741 net undrilled locations representing an inventory life of 12 to 15 years that immediately competes for capital in the Baytex portfolio. This includes 523 quality Lower Eagle Ford opportunities and 218 additional Upper Eagle Ford and Austin Chalk opportunities.