Strathcona Sells Montney Business, Acquires Hardisty Rail Terminal
The agreements are pursuant to the following three separate transactions:
- The sale of its Kakwa asset (the Kakwa Sale) to ARC Resources Ltd. for approximately $1.695 million in total value ($1.650 million in cash and approximately $45 million in assumed lease obligations).
- The sale of its Grande Prairie asset (the Grande Prairie Sale) for approximately $850 million in total value ($750 million in cash and approximately $100 million in assumed lease obligations).
- The sale of its Groundbirch asset (the Groundbirch Sale) to Tourmaline Oil Corp. (Tourmaline) for $291.5 million in common shares of Tourmaline.
Taken together, Strathcona says the disposed assets generated $149 million of operating earnings in 2024 (12% of total Strathcona YE 2024 operating earnings, excluding interest and other corporate items) and had a YE 2024 proved PV-10 before-tax of approximately $2.3 billion (15% of total Strathcona YE 2024 proved PV-10), while the combined sale price represents approximately 33% of Strathcona’s current enterprise value. The table below shows Strathcona’s consolidated results for the year ended December 31, 2024, less the Montney dispositions.
The Kakwa Sale is expected to occur early in the third quarter of 2025, “subject to receipt of regulatory approvals and the satisfaction of other customary closing conditions.”
The Grande Prairie Sale is expected to occur early in the third quarter of 2025, “subject to receipt of regulatory approvals and the satisfaction of other customary closing conditions.”
The Groundbirch sale is expected to occur in the second quarter of 2025, “subject to receipt of regulatory approvals and the satisfaction of other customary closing conditions.” The share consideration is not subject to any lock-up periods beyond a four-month statutory hold period. Strathcona says it is “delighted to be a shareholder of Tourmaline and has no plans to dispose of the shares at this time.”
Strathcona has $5.5 billion of tax pools at March 31, 2025, and does not expect any cash taxes to result from the Montney dispositions.
Upon completion of the Montney dispositions, Strathcona says it will be a “pure-play heavy oil company producing approximately 120 Mbbls / d (100% oil, 95 Mbbls / d thermal, 25 Mbbls / d conventional) with a 50-year 2P reserve life index and positive net cash (including marketable securities).”
Also in the first quarter of 2025, Strathcona signed a definitive agreement to acquire the Hardisty Rail Terminal (HRT) for cash consideration of approximately $45 million and closed on the acquisition early in the second quarter. HRT, located in Hardisty, Alberta, is the largest crude-by-rail terminal in Western Canada with capacity of 262 Mbbls / d and year-to-date throughput of approximately 50 Mbbls / d. HRT is directly connected to the Hardisty Diluent Recovery Unit, an innovative facility which separates diluent from raw bitumen prior to rail transportation, allowing for a competitive netback for upstream producers versus pipeline alternatives.
HRT has an estimated replacement cost of approximately $200 million and free cash flow over the past 12 months of approximately $12 million, 80% of which is underpinned by long-term take-or-pay contracts with an investment grade counterparty. Together with Strathcona’s Hamlin Terminal, Strathcona now owns and operates rail terminals servicing approximately 80% of the total current crude-by-rail volumes in western Canada, “allowing for meaningful economies of scale,” the company noted.
The HRT acquisition, the company says, “is a continuation of Strathcona’s countercyclical acquisition strategy focused on core area consolidation.” While HRT is only 19% utilized today, it has been up to 82% utilized historically during periods of tight pipeline egress, “providing Strathcona with a natural hedge against future egress bottlenecks.”
More information is available here.
