Mike Rose, chairman and chief executive officer of Tourmaline Oil Corp., listens during an interview in New York, U.S., on Thursday, March 12, 2015.Victor J. Blue/Bloomberg
Tourmaline Oil Corp. chief executive Mike Rose is happy to talk about his company's latest acquisition, but he won't get drawn in to discussing his family's connection to it.
Tourmaline is buying out its partner's share of a central Alberta Deep Basin natural-gas play, paying $257-million in stock. The seller in the West Edson play is Perpetual Energy Inc., whose chief executive is Susan Riddell Rose, the Tourmaline CEO's wife.
The deal allows Tourmaline, considered one of the oil patch's most successful intermediate firms, to consolidate a big chunk of prolific acreage in a main operating region. Perpetual, meanwhile, can still participate through a 3-per-cent holding in Tourmaline, while freeing up spending obligations amid depressed oil and gas prices.
Mr. Rose, in an interview at FirstEnergy Capital Corp.'s energy conference in New York, wouldn't bite on a discussion about family connections, however, preferring to stick with the deal's mechanics.
"We'll leave that one out of the story," he said when pressed. "I know it is a win-win transaction for both companies. They wanted as much value as they could possibly get – their board believes that Tourmaline shares are under-valued. They get the upside in the property that they might not get in this pricing environment."
Tourmaline will likely speed up development there.
Under the transaction, announced late Thursday, Perpetual gets 6.75-million Tourmaline shares for 7.2 million barrels of oil equivalent of proved and probable developed gas and gas-liquids reserves, as well as undeveloped land and processing and pipeline gear. It plans to hold on to the shares, which will allow it to redeem outstanding debentures.
The family's control over sizeable parts of the Canadian oil patch are well-known. Ms. Riddell Rose's father, Clayton Riddell, is chairman and CEO of Paramount Resources Ltd. and has interests in several other concerns, including the Calgary Flames. His son, Jim Riddell, is CEO of Trilogy Energy Corp.
For its part, the transaction allows Tourmaline to maintain its "pristine" balance sheet, Mr. Rose said.
"We can preserve cash to do other deals if they come along, or accelerate the [drilling] program if commodity prices start to smarten up a little," he said.
Mr. Rose said U.S. investment funds attending the conference are beginning to take another look at the Canadian oil patch, their interest piqued by the beaten-down share values and the weaker Canadian dollar.
There is still concern among about the downturn in commodity prices, but companies with low costs and manageable debt make for a potentially attractive buy, he said.
"At this point in the cycle, balance sheets become more important. Tourmaline specifically has done a good job, having one of the lowest debt-to-cash-flow [ratios]. Those are the conversations that we're having."