Painted Pony Petroleum has agreed a C$276.6 million (US$207 million) deal to acquire fellow western Canadian player UGR Blair Creek, writes Tonya Zelinsky.

The Canadian junior entered into a share purchase agreement to acquire all the issued and outstanding shares of privately-held UGR — a subsidiary of Unconventional Resources Canada (URC).

UGR, which is estimated to hold 2 trillion cubic feet equivalent of proven plus probable reserves, holds interests in the Montney play as well as production, infrastructure and a land holding joint venture with Painted Pony, adjacent to the latter’s assets in north-eastern British Columbia.

Painted Pony has agreed to issue 41 million common shares to URC for a price of C$5.60 per share for a total consideration of C$229.6 million, and will assume C$47 million in UGR’s debt. It will also seek C$100 million in equity financing.

In exchange, Painted Pony gets 69,143 net acres (25,553 hectares) in the Montney and current production of more than 8500 barrels of oil equivalent per day.

The deal also includes a UGR-owned and third-party operated processing capacity of 155 million cubic feet per day.

Painted Pony chief executive Pat Ward said UGR’s assets “fit like a glove” with the company’s current asset base.

However, Norman MacDonald, the company’s largest shareholder with more than 9% ownership, argued the deal would dilute Painted Pony shares.

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Painted Pony in UGR deal