How does Steelhead’s valuation of Toro stack up against similar sized Western Canada juniors?

Steelhead Petroleum, a private ARC Financial Corp. sponsored company, announced yesterday their intent to acquire Toro Oil & Gas Ltd. The valuation Steelhead agreed to pay for Toro’s 748 boe/d amounted to roughly $60,000 per barrel.

But how does this valuation compare to other similarly sized Western Canadian junior producers?

The below chart uses data from BOE Report Finance and compares the enterprise values of publicly traded Western Canada junior producers with daily production between 500-1,500 boe/d.

There are a couple of things to note in the data presented:

• Those familiar with Leucrotta Exploration’s production numbers may wonder why the company is not included in the chart. The reason for that is Leucrotta’s current market valuation is skewed much higher than the average range as a likely result of being in a financial position characterized by minimal debt on the balance sheet while holding lots of cash.
• Each valuation is based on last Friday’s market close (which largely accounts for the recent run up in the price of oil)

What is clear is the valuation Steelhead agreed to (which was in fact priced at a 39% premium to what Toro was trading for before the announcement) is largely in line with what other similar companies are currently trading for.

Another interesting insight is that Western Canada juniors with valuations rangeing from $20,000-50,000 boe/d are priced at a slight discount to their more senior counterparts. Western Canadian senior producers (with production between 50,000-100,000 boe/d) are currently fetching valuations ranging from  $50,000-75,000 boe/d (source BOE Report Finance).