Voyager Oil and Gas Inc., a Billings-based oil and gas company, hopes to expand its operations in central Montana and the Williston Basin with the acquisition of the Australian oil and gas company Emerald Oil Inc.
Under a $40 million agreement announced recently, Voyager will acquire Emerald Oil to create a U.S.-based company that will focus on developing unconventional oil resources from shale.
Under the deal, Voyager will acquire 100 percent of Emerald Oil’s equity in exchange for 11.6 million shares, or a 19.9 percent stake, in Voyager’s common stock. Voyager will also assume $19 million in Emerald’s debt.
When the deal is closed, Voyager’s existing shareholders will own 80 percent of the combined company, and Emerald Oil will own the remaining 20 percent.
“We’ll be able to take more control of our own destiny and grow the production at a faster rate,” said McAndrew Rudisill, the new president of Voyager Oil and Gas. Rudisill said the company will pursue a plan for developing “operated acreage,” meaning it will use its own oil rig to explore leases rather than leasing rigs from other companies.
The combined company’s first operated well will be in Dunn County, N.D., which is planned to begin drilling in early 2013 and will be followed by a continuous single-rig drilling program in 2013.
“This is a transformational event that is expected to benefit the shareholders of both companies,” said J.R. Reger, Voyager’s chief executive officer, who will serve as executive chairman of the combined company.
Reger, a member of a Billings family with roots in the oil industry, said the merger provides the company access to strategic acreage.
The announcement comes as U.S. oil production has averaged 6.3 million barrels per day, its highest level since 1997, in part because of rapid development in the Bakken and other non-traditional oil plays.
Oil prices have softened recently, and the U.S. benchmark price for crude is expected to average about $88 per barrel for the rest of the year. Rudisill remains optimistic about the long term.
“The big picture is that there’s so much recoverable oil in place in the Middle Bakken and (a related formation) the Three Forks,” he said. “I don’t have a crystal ball, but I believe we’ll continue to see tight supplies for a few years.”
Following the transaction, the company will hold about 43,500 net acres within the Williston Basin, 45,000 acres within the Sandwash Basin Niobrara formation in Colorado and Wyoming, and 33,500 acres within the Heath shale in central Montana.
Emerald Oil is a subsidiary of Emerald Oil & Gas, an Australian company listed by the Australian Securities Exchange. Emerald Oil was formed by EMR in 2011 as part of the company’s strategy for acquiring unconventional oil and gas plays in the Rocky Mountain region.
Voyager Oil & Gas acquires acreage in prospective natural resource plays across the continental United States. The business is focused on properties in Montana and North Dakota, and has expanded to target properties in Northeastern Colorado and Southeastern Wyoming.