04/03/2013 02:26 EDT | Updated 06/03/2013 05:12 EDT

Legacy grows footprint in Alberta, Saskatchewan through acquisition deals

CALGARY - Legacy Oil and Gas Inc. (TSX:LEG) says it is paying a total of $108.6 million in cash through two separate deals to add to its existing light oil presence in Saskatchewan and Alberta.

In the first transaction, Legacy is buying light oil producing assets, facilities and undeveloped land around Turner Valley, Alta., and Taylorton, Sask., for $57.5 million in cash. The deal, with an unidentified seller described as a "Canadian senior producer," is expected to close in the second quarter.

The second deal will see Legacy acquire privately held Saskatchewan-based firm Villanova Oil Corp. for $21.3 million in cash and assume $29.8 million in debt. Legacy will also issue 13.9 million shares, each valued at $5.48, to Villanova shareholders. That deal is expected to close no later than May 23.

"The acquisitions represent the successful continuation of Legacy's business plan to acquire high quality conventional and resource play light oil assets and strengthen its operating position within its core areas," the company said in a release Wednesday.

The lands being acquired currently produce 1,775 barrels of oil per day and have proved plus probable reserves of 9.1 million barrels. More than 13,000 hectares have not yet been developed.

Legacy said it now expects to produce 21,500 barrels per day by the end of this year — a 20 per cent increase over its 2012 rate.

"We view Legacy’s two strategic acquisitions positively. However, our key concern with the story at this time remains the balance sheet," wrote Desjardins Securities analyst Alan Stepa in a research note, adding the company exited 2012 with about $486 million in net debt.

Legacy shares dropped about three per cent to $5.30 in afternoon trading on the Toronto Stock Exchange.