On August 18, 2016, Paramount Resources Ltd. (Paramount) completed the sale of oil and gas assets in the Musreau/Kakwa area of west-central Alberta to Seven Generations Energy Ltd. (Seven Generations) for total consideration of approximately $2.1 billion. The consideration included approximately $500 million in cash (after closing adjustments), 33.5 million Seven Generations shares (worth approximately $1.0 billion based on the trading price at the time of closing) and the assumption by Seven Generations of US$450 million of high yield notes of Paramount.
Paramount is an independent, publicly traded, Canadian corporation that explores for and develops conventional petroleum and natural gas prospects, pursues longer-term non-conventional exploration and pre-development projects and holds investments in other entities. Seven Generations is a low-cost, high-growth Canadian natural gas developer generating long-life value from its liquids-rich Kakwa River Project, located about 100 kilometres south of its operations headquarters in Grande Prairie, Alberta.
This transaction was complex as it combined asset sale, share issuance, corporate reorganization and debt restructuring elements as part of the transaction. It included Paramount shareholder approval, an internal corporate reorganization by Paramount, a combined consent solicitation and partial redemption for a series of Paramount’s outstanding high yield notes, the assumption by Seven Generations of Paramount’s other series of high yield notes, Paramount’s repayment of its credit facility and implementation of a new bank credit facility.
In addition, on July 26, 2016, Seven Generations completed a bought-deal financing through a syndicate of underwriters co-led by RBC Dominion Securities Inc., Peters & Co. Limited and Credit Suisse Securities (Canada) Inc. and including CIBC World Markets Inc., Scotia Capital Inc., TD Securities Inc., BMO Nesbitt Burns Inc., Macquarie Capital Markets Canada Ltd., National Bank Financial Inc., Raymond James Ltd., AltaCorp Capital Inc., Cormack Securities Inc., Desjardins Securities Inc. and FirstEnergy Capital Corp. (collectively, the Underwriters) to partially finance the cash portion of the purchase consideration for the acquisition. Seven Generations issued 30,705,000 subscription receipts (including 4,005,000 subscription receipts issued upon the exercise in full of the over-allotment option granted to the Underwriters) at a price of $24.35 per subscription receipt for gross proceeds of approximately $748 million. Each subscription receipt entitled the holder thereof to receive one common share of Seven Generations upon completion of the acquisition.
Concurrent with closing of the acquisition, Seven Generations amended and restated its credit agreement with a syndicate of lenders led by Royal Bank of Canada, as administrative agent, to increase the reserve-based credit facility from $850 million to $1.1 billion.
Paramount was represented by Norton Rose Fulbright Canada LLP with a team led by Kevin Johnson, Marcus Archer, Wayne Fedun and Rick Borden and including Jennifer Kennedy, Dion Legge, Rujuta Patel, Kathleen Cowick, Ryan Keays, Robert Froehlich, Matt Longstaff, Julianna Fish, Saptarshi Chakraborty, Rob Joseph, Anna Wingfield, Jennifer Kwong, Jon Watson and Andrew Lim.
Seven Generations was led by its General Counsel, Kyle Brunner, and also represented by Stikeman Elliott LLP with a team led by Leland Corbett and including Chrysten Perry, Susan Hutton, Benjamin Hudy, Kurtis Reed, Amy Nugent, Janel Young, Brandon Leitch, Michael Rosenstock, Rhonda Ferguson and Haifeng Hu. In respect of United States matters, Seven Generations was represented by Simpson Thacher & Bartlett LLP with a team comprising Joseph Kaufman and Lisa Zhang.
The Underwriters were represented by Burnet, Duckworth & Palmer LLP with a team led by Alyson Goldman and Steve Cohen and including Jessica Brown and Shanlee Von Vegesack. In respect of United States matters, the Underwriters were represented by Paul, Weiss, Rifkind, Wharton & Garrison LLP with a team comprising Andrew Foley, Christopher Cummings and Rebecca Vasluianu.
The trustee of the high-yield notes Seven Generations assumed from Paramount was represented by Shipman & Goodwin LLP with a team comprising Marie Pollio and Chasity Roberts.