Calgary – TORC Oil & Gas Ltd. has completed the acquisition of Villanova 4 Oil Corp., a private oil company with complementary high quality, light oil assets in southeast Saskatchewan.
The strategic acquisition of V4 includes over 1,000 boepd (80 per cent light oil and liquids) of high netback, light oil producing assets which are primarily focused in the emerging unconventional Midale play. The assets enhance TORC's high quality inventory in this play along with providing infrastructure synergies. Aggregate consideration for the acquisition is comprised of the issuance of 2.1 million TORC common shares and $46.5 million in cash.
Villanova 4 had been incorporated in June 2012, and was based in Regina as part of the Keystone Group of companies.
Craig Lothian, was, up until recently, the executive chairman and acting CEO of Villanova 4. When asked via email by Pipeline News if there would be a fifth Villanova, Lothian responded, “As for a Villanova 5, we don’t currently intend to create another Villanova E&P company. If we do, it would be as a subsidiary of Keystone.”
With the closing of the latest acquisition, TORC is increasing the company's 2018 capital budget to $185 million from $180 million previously. The 2018 capital program will remain concentrated on the company's primary core areas in southeast Saskatchewan, focused on both conventional and unconventional opportunities, and the Cardium play in central Alberta. TORC continues to focus on operational efficiencies with a goal of achieving results that exceed budget expectations.
Based on current commodity prices and budgeted cost structure, TORC said it expects to achieve significant free cash flow in 2018 while growing production and paying the current dividend.
TORC has undertaken an active commodity hedging program to further protect its core capital spending requirements and dividend policy and currently has 4,750 bpd of oil production hedged through the remainder of 2018.
Increased production guidance
TORC is increasing the company's 2018 average production guidance to 25,100 boepd from 24,700 boepd previously and 2018 exit production guidance to 28,000 boepd from 27,000 boepd previously.
The company reported record quarterly production of 23,059 boepd, up from 22,894 boepd in the first quarter of 2018 and 20,775 boepd in the second quarter of 2017.
TORC generated cash flow of $75.3 million relative to $64 million in the first quarter of 2018 and $52.5 million in the second quarter of 2017. Net income in Q2 2018 surged to $13.3 million from $2.5 million the previous year.
The company successfully drilled eight (7.0 net) wells and completed seven (6.25 net) wells.
During the second quarter, TORC declared dividends of $12.9 million of which $3.8 million was paid under the share dividend program.
The company achieved a payout ratio (excluding acquisitions) of 52 per cent in the second quarter and 61 per cent for the first half while still growing production (exclusive of acquisitions).
On June 27, TORC successfully closed the strategic acquisition of approximately 3,200 boepd of light oil focused production in the company's southeast Saskatchewan core area for aggregate consideration comprised of the issuance of 13.5 million TORC common shares and $125 million in cash, prior to closing adjustments.
Subsequent to the closing, the 13.5 million TORC common shares issued cleared through a successful block trade. As part of the block trade, TORC's major shareholder, the Canada Pension Plan Investment Board, increased its ownership position from approximately 24 per cent to 28 per cent currently.
TORC exited the quarter with net debt of approximately $367 million with $324 million drawn on the company's $500 million credit facility.