Black Shire produces about 7,000 barrels per day around Provost, Alta., which is near Twin Butte's core existing heavy oil operations near the Alberta-Saskatchewan border.
"Black Shire is an attractive acquisition for Twin Butte in that it has demonstrated its ability to generate substantial free cash flow while developing its large and low risk horizontal drilling inventory, providing growth in production and reserves," Twin Butte said in a release.
"Twin Butte believes that the Black Shire acquisition strategically supports Twin Butte's dividend model and enhances the company's long term dividend sustainability."
Twin Butte has agreed to acquire each Black Shire share with $2 in cash plus 0.697 of one its own shares, based on the 10-day volume-weighted average price of $2.08.
In connection with the acquisition, Twin Butte has also announced plans to raise $70 million in financing through a bought-deal with a syndicate of underwriters led by Peters & Co.