Vermilion (VET) to acquire Leucrotta (LXE): A TSX energy stock to buy?

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 Vermilion (VET) to acquire Leucrotta (LXE): A TSX energy stock to buy?
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Highlights

  • Vermilion Energy Inc (TSX: VET) and Leucrotta Exploration Inc (TSXV: LXE) have been trending high on the stock markets. 
  • The two companies announced a strategic deal for a net cash consideration of C$ 477 million on Monday, March 28. 
  • Stocks of Vermillion Energy dropped by nearly four per cent, while LXE stocks galloped by 50 per cent at 11:49 AM EST following this announcement.

Vermilion Energy Inc (TSX: VET) and Leucrotta Exploration Inc (TSXV: LXE) have been trending high on the stock markets.  

The surge came as the two companies announced a strategic deal for a net cash consideration of C$ 477 million on Monday, March 28. 

Stocks of Vermillion Energy dropped by nearly four per cent, while LXE stocks galloped by 50 per cent at 11:49 AM EST following this announcement.

Vermilion Energy and Leucrotta acquisition deal: What to know? 

According to the acquisition arrangement, Vermillion Energy will purchase all issued and outstanding shares of Leucrotta (including any convertible securities) for a cash consideration of C$ 1.73 apiece.  

In addition, a part of its land base and cash of about C$ 43.5 million will be transferred to a new firm, ExploreCo, to be led by the Leucrotta team. The agreement also includes a break fee of C$ 20 million payable to the acquirer.

Also read: RCI.B and NA: 2 TSX blue-chip stocks that can help amid stagflation 

Now, let us get an overview of both Canadian companies. 

Vermilion Energy Inc (TSX: VET)

Vermilion reported net earnings of C$ 344.58 million in Q4 FY2021, notably up from a loss of C$ 57.7 million a year ago. 

Having closed at C$ 29.20, VET stock was trading lower at C$ 28.15 apiece on Monday.  

VET stock, however, have swelled by over 194 per cent year-over-year (YoY).

Vermilion Energy Inc (TSX: VET)’s stock performance

Leucrotta Exploration Inc (TSXV: LXE)

Leucrotta Exploration saw a net profit of C$ 66.54 million in 2021, up from a loss of C$ 2.52 million a year ago. 

Having closed at C$ 1.30 on Friday, LXE stock was trading at C$ 1.95 apiece on Monday.  

LXE stock also increased by roughly 179 per cent in the last one year. 

Bottomline

With this acquisition, Vermilion said that it expects to expand its North American asset portfolio by targeting “underexploited” consolidation opportunities and adding an “inventory-rich” land base in Montney. This, it believes, could help in strengthening its free cash flow profile. 

Also read: Sigma (SGML) & Standard (SLI): Are these 2 TSXV lithium stocks a buy? 

Please note, the above content constitutes a very preliminary observation based on the industry, and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks. 

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