Houston-based Chord Energy has announced plans to acquire Canadian producer Enerplus Corp. in a deal with an implied valued at $3.8 billion. The transaction, which involves a combination of stock and cash, will create a company with an enterprise value of $11 billion.
The company’s footprint will expand to 1.3 million acres, 98% of which is in North Dakota’s Williston Basin which is home to the prolific Bakken Shale.
The transaction aligns with the ongoing consolidation trend in the North American shale sector that has been marked in recent months by major acquisitions from large oil and gas companies including ExxonMobil, Chevron, Chesapeake Energy, and Diamondback Energy.
Chord said its daily output will increase as a result of the deal to a basin-leading average of 287,000 BOE/D, about 56% of which is crude oil.
The company emphasized the combined inventory may support up to 10 years of drilling for new wells. Notably, 40% of these potential wells are considered candidates for 3-mile lateral sections which are considered to deliver attractive capital efficiencies.
Chord also projects the combined acreage holds some 1,800 undeveloped locations that can break even at US oil prices of around $60/bbl.
“This combination further strengthens our Williston Basin position and represents a compelling opportunity for both companies' shareholders," Danny Brown, CEO of Chord, said in a statement.
Under the terms of the agreement, Enerplus shareholders will receive nearly 90% of the purchase price in Chord common shares, with the remaining 10% paid in cash.
The deal also includes Enerplus' outstanding debt. Post-transaction, Chord shareholders will hold approximately 67% of the new company, with Enerplus shareholders owning the remaining 33%.
Chord said the combination will generate around $1.2 billion in free cash flow this year, assuming a reinvestment rate of about 51% based on a $79/bbl WTI oil price and a $2.50/MMBtu US gas price.
Additionally, the merger is expected to yield $150 million in annual savings due to reductions in administrative and operational expenses.
Upon completion of the deal, expected by the third quarter, the board of directors will expand to 11 members, with seven from Chord and four from Enerplus, including current Enerplus CEO, Ian Dundas. Brown will remain in his position as the CEO of the combined company.
