Buyout firm KKR looks to sell Canadian gas producer Westbrick -sources

Paramount Resources (Pre-Merger)

18/11/2022 11:00

(Repeats story first published on Thursday.)
    By Shariq Khan and Rod Nickel
       Nov 17 (Reuters) - Private equity firm KKR & Co  KKR.N 
is seeking buyers for Canadian oil and gas producer Westbrick
Energy Ltd to cash in on high energy prices, in a potential deal
valued at around C$1.5 billion to C$2.0 billion ($1.13 billion
to $1.5 billion), two sources familiar with the matter said on
Thursday.
    Majority owner KKR aims to strike a deal by the end of the
year, one of the sources said, adding that KKR could still
retain the company if it does not receive suitable offers.
    Paramount Resources Ltd  POU.TO  owns a smaller stake,
according to Westbrick's website. Paramount's CEO, Jim Riddell,
a Westbrick director, could not immediately be reached.
    The sources requested anonymity as the plans are
confidential. KKR declined to comment.
    Strong oil and gas prices, compared with lows of 2014-15,
have given private equity firms a window to sell out of energy
investments, after many were left stranded in companies longer
than their usual investment horizons of three to five years.
    A sale of Westbrick would mark an exit from the Canadian oil
and gas production business for KKR. Other big private equity
firms, as well as some international energy companies, have left
in recent years over concerns about the environmental impact of
such investments and relatively poor returns.
    KKR has owned Westbrick for a decade, longer than most of
its investments, making a sale logical, one of the sources said.
KKR invested C$250 million in Westbrick when it was a smaller
producer in 2012.
    Apart from Westbrick, KKR's other investments in Canada
include gas processing assets and a stake in the Coastal GasLink
pipeline under construction.
    Westbrick Chief Executive Officer Ken McCagherty, who has
led the company since its formation in 2011, did not confirm or
deny that the company is seeking a sale soon. 
    "Anyone who knows me knows that Westbrick has been for sale
every day since our existence," he told Reuters via email.
    He added it is not surprising to see interest in acquiring
the company, and did not respond to further questions.
    Calgary, Alberta-based Westbrick produced 36,000 barrels of
oil equivalent per day (boepd) in 2021, mostly gas in Greater
Pembina Basin, according to the most recent available
information on its website. It planned to reach 50,000 boepd by
June 2022.
    Should Westbrick fetch a price closer to the lower end of
its expected range, it would represent a lower cash flow
multiple than historic multiples, due to volatile commodity
prices and backwardation, a situation where spot prices exceed
futures prices, said Ryan Ferguson Young, president of Earth
Horse Energy Advisors.
    KKR's efforts to sell Westbrick come as merger and
acquisition activity among Canadian oil and gas producers
dropped 53% in the first half of 2022 versus a year ago to C$5.2
billion, according to Sayer Energy Advisors.
 ($1 = 1.3337 Canadian dollars)
 (Reporting by Shariq Khan in Bengaluru and Rod Nickel in
Winnipeg, Manitoba
Additional reporting by David French in New York
Editing by Denny Thomas and Matthew Lewis)
 ((Shariq.Khan@thomsonreuters.com; Twitter: @shariqrtrs;))