Houston-based Penn Virginia Corp. reached a deal to acquire Fort Worth-based energy company Lonestar Resources US.
The oil and gas company will acquire Lonestar Resources US Inc. in an all-stock deal valued at approximately $370 million as of July 9, Penn Virginia announced yesterday. That includes about 5.9 million shares of Penn Virginia common stock and the assumption of approximately $236 million of Lonestar's net debt.
Lonestar shareholders will receive 0.51 shares of common stock of PVAC for each share of common stock of LONE. Penn Virginia shareholders will own approximately 87% of the combined company, and Lonestar will own the other 13%.
The deal is expected to close in the second half of 2021. Lonestar shareholders holding approximately 80% of the voting power of Lonestar and Penn Virginia shareholders holding approximately 60% of the voting power of Penn Virginia have already agreed to vote in favor of the deal.
“This is an exciting time for Penn Virginia as we expand our Eagle Ford footprint with the high-quality assets of Lonestar," said Darrin Henke, Penn Virginia's president and CEO.
"This transaction further solidifies the company’s position as a premier Eagle Ford operator and provides additional scale and synergies while still delivering operational excellence," Henke continued. "Consistent with our disciplined strategy, this transaction is expected to be accretive to free cash flow and certain other key per share metrics to deliver long-term value to shareholders. The benefits of basin consolidation are very compelling, and we strongly believe this is a value-creating opportunity for both companies. We remain steadfast in our disciplined approach to running the business and continue to be committed to free cash flow generation, capital discipline, maximizing cash-on-cash returns, and protecting the environment.”
The acquisition increases Penn Virginia's inventory locations by 50% to 750 gross locations and is expected to increase estimated 2021 sales volumes and free cash flow by 50%. It also is expected to increase Penn Virginia's market capitalization by 15%. The combined company is expected to create cost savings of over $20 million annually.
“In today’s environment, size and scale are paramount, both in terms of operations and in the public markets," said Frank D. Bracken III, Lonestar's CEO. "The merger exposes Lonestar shareholders to a substantially larger, more liquid, publicly listed platform and the combination of the two companies’ high quality, liquids-focused operations should provide significant benefit to both shareholder groups, positioning the company as a dominant force in the Eagle Ford Shale.”
Edward Geiser, chairman of Penn Virginia and managing partner of Juniper Capital, added, “This is exactly the type of accretive Eagle Ford consolidation we have been targeting and creates a significant opportunity for investors. Penn Virginia and Lonestar fit well strategically, and the combined company will be stronger across key financial metrics, will operate more efficiently than each company standalone, and will continue Penn Virginia’s commitment to environmental and social stewardship. "We look forward to working with the Lonestar team to complete this transaction, and we will be actively screening for additional attractive consolidation opportunities as we move forward. Juniper is excited about what the Penn Virginia team has been able to achieve over the six months since we closed our investment in the company, and we remain committed to its long-term success.”
