- Canadian oil and gas producer i3 Energy (TSX:ITE) has cut a deal with Colombian producer Gran Tierra Energy (TSX:GTE) to be acquired at a hefty premium
- The acquisition strengthens the case for Gran Tierra’s undervaluation given recent profitable growth
- i3 Energy stock is up by 23.53 per cent trading at C$0.21 per share as of 10:59 am ET
- Gran Tierra Energy stock is down by 7.93 per cent trading at C$10.68 per share as of 11:06 am ET
Canadian oil and gas producer i3 Energy (TSX:ITE) has cut a deal with Colombian producer Gran Tierra Energy (TSX:GTE) to be acquired at a hefty premium.
Consideration includes one Gran Tierra share for every 207 i3 Energy shares held, in addition to 10.43 pence in cash per i3 Energy share, with the currency reflecting that the transaction is taking place through the London Stock Exchange.
The acquisition price represents a premium of 49 per cent to the closing price of 9.34 pence on August 16, 2024, which Gran Tierra sees as highly-value accretive given the combined companies’ numerous green flags. These include:
- Increased diversification into Canada with i3’s operations in the Western Canadian Sedimentary Basin. The company has guided for 18,000-19,000 barrels of oil equivalent (boe) per day in 2024, bolstering Gran Tierra’s expected 32,000-35,000.
- An increase in proved reserves from 90 million boe to 177 million boe.
- An increase in proved and probable reserves from 147 million boe to 322 million boe.
- i3’s profitable operations over the past three years, including net income of £25.08 million in 2021, £41.95 million in 2022 and £15.15 million in 2023.
- i3’s expected 2024 EBITDA of US$50 million to US$55 million, complementing Gran Tierra’s expected US$335 million to US$395 million at a base case of US$70 per barrel of Brent oil, expediting growth initiatives across the combined company’s assets in Canada, Colombia and Ecuador.
The acquisition aligns with Gran Tierra’s long-term strategy of diversifying into “specific oil and gas basins where it is confident it can create shareholder value focused on operated, high-quality assets with large resources in place and access to infrastructure,” according to today’s news release, with the Western Canadian Sedimentary Basin sitting near the top of the company’s priority list.
In terms of its ability to generate shareholder value, Gran Tierra has posted a 24.13 per cent return year-over-year, coming in well ahead of the TSX’s 16.51 per cent, though the oil and gas stock remains down by over 33 per cent over the past five years.
This lackluster performance suggests undervaluation, given how Gran Tierra has emerged from the pandemic with three years of upward trends in adjusted EBITDA, production, reserve expansion and debt reduction (slide 7).
About i3 Energy
i3 Energy is an oil and gas company with a low-cost, diversified and growing production base in Canada’s most prolific hydrocarbon region, the Western Canadian Sedimentary Basin, as well as appraisal assets in the North Sea with significant upside.
i3 Energy stock (TSX:ITE) is up by 23.53 per cent trading at C$0.21 per share as of 10:59 am ET. The stock is flat year-over-year and has gained 61.54 per cent since 2020.
About Gran Tierra Energy
Gran Tierra is an independent energy company focused on oil and natural gas exploration and production in Colombia and Ecuador.
Gran Tierra Energy stock (TSX:GTE) is down by 7.93 per cent trading at C$10.68 per share as of 11:06 am ET.
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(Top photo: i3 Energy)