Sprott Resource Corp. (SCP.TO), a natural resource company, announced Monday that it has signed an agreement with Auriga Energy Inc. to purchase all the outstanding common shares of Auriga.
According to the agreement, a newly formed subsidiary of Sprott Resource, Acquireco, will purchase all the issued and outstanding common shares of Auriga Energy by way of exempt take-over bid. Each shareholder of Auriga will receive 0.3 of an Acquireco common share and 0.0979 of an Sprott Resource common share for each Auriga share held.
Auriga, a private oil and gas company, was founded in 1988 by Natural Gas Partners, an affiliate of NGP Energy Capital Management.
Acquireco completed purchase of 7.95 million common shares in the capital of Auriga at a price of US$0.44 per share for US$3.5 million by a private placement. On completion of the acquisition, according to the agreement, Sprott Resource will own 70% of Acquireco and the existing shareholders of Auriga will own 30% of Acquireco.
Sprott Resource intends to raise its holding in Acquireco to approximately 81.4% by purchase of up to US$56.5 million of Acquireco common shares after the closing of the acquisition, as per the terms.
The company expects the closing to end by October. Pursuant to the deal, a shareholder holding 80.3% of the Auriga shares has agreed to sell all of its Auriga shares to Acquireco and holders of an additional 12.7% Auriga shares also entered into agreements to support the acquisition.
Kevin Bambrough, President and CEO of Sprott Resource, commenting on the agreement said, "Acquiring and recapitalizing long life, low cost, condensate rich natural gas reserves at a good valuation during a period of depressed natural gas prices fits perfectly with our business plan."
Gary Guidry has been appointed as President and CEO of Acquireco. Recently, Guidry was the CEO of Tanganyika, which was sold to Sinopec last year for over $2 billion.
"With the injection of new capital we expect to be able to quickly capitalize on the development opportunities within Auriga's portfolio," said Gary Guidry.
The primary asset of Auriga Energy is the condensate rich Kaybob South Beaverhill Lake Gas Unit No. 1, which is material in size, geologically well-defined and has proven performance from significant prior development across the Kaybob structure, the company said.
Accroding to Sproule Associates, an independent qualified reserves evaluator, Auriga has total proved reserves of light or medium oil is 1.14 million barrels and natural gas of 40.24 billion cubic feet.
TD Securities Inc. acted as sole financial advisor to management of Acquireco on the Acquisition. Ivy Capital Partners Ltd. and Scotia Waterous acted as advisors to Auriga.
SCP.TO is currently trading at C$3.18, up 1.92% on TSE.
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