Outside the oil sands, the mood has been bolder, and far more acquisitive. Today another company joined the feeding frenzy. Alex Verge's Journey Energy Inc. (JOY) added 14 cents to $1.33 on 149,300 shares, after agreeing to buy a private Alberta company for $2.9-million cash and 3.5 million shares. The private company is producing 610 barrels of oil equivalent a day. As a result, Journey now expects to produce 7,600 to 7,900 barrels a day this year, up from the old range of 7,300 to 7,600.
Journey did not identify the private company. It identified itself, however, as junior Cardium producer Briko Energy. The name will ring a bell for some energy investors. Briko, a promotion of Mike Kohut, John van de Pol and Tim de Freitas, was formed in 2018 as part of Pieridae Energy Ltd.'s (PEA: $0.46) takeover of Ikkuma Resources. Pieridae was interested in Ikkuma's conventional Alberta gas assets, not the earlier-stage Cardium ones. Ikkuma's shareholders thus received some equity in Pieridae and some equity in a Cardium-focused spinout, Briko. The value of Briko was not specified, but the equity component came with warrants exercisable at $1.10, giving a sense of where Briko wanted to go. Unfortunately, where Briko wanted to go is not where it ended up. The cash-strapped company put itself up for sale in January, 2021, and has now signed an agreement with Journey that values each Briko share at 59 cents.
Journey is pleased with the deal. Briko's production, while small in scale, is stable and enjoys a low decline rate. Briko also owns 200,000 net acres of undeveloped land (providing a large inventory of potential wells) and its balance sheet, rather remarkably, is debt free. It even has a small working capital surplus of about $800,000. (Journey's working capital as of March 31 was negative $16.5-million and its net debt was $83.7-million.) The companies are aiming to close the deal in August.