Disclosure: The following represents my opinions only. I am long TNZ. I have not been paid or compensated by TNZ for writing this. (image credit to Josue Isai Ramos Figueroa on Unsplash)
I love it when I get to write about my favourite position, especially when it’s up nearly 32% to yet another all-time high on the back of yet another strategic — and highly accretive — acquisition. This morning before the market opened, Tenaz Energy (TNZ.TO, last at $26.73) announced that it has signed (and closed) the acquisition of a private company with interests in the “Gateway to the Ems” (GEMS) project on the boundary of the Dutch and German sectors of the North Sea for CDN$339 million (USD$244 million). The acquisition is 99% gas weighted and is projected to produce 3,200 boepd in 2025, ~7,000 boepd in 2026, and ~12,000 boepd to 2027 net to TNZ on a risked basis (facility constrained), with the potential for additional growth through a robust development and exploration pipeline. This takes TNZ’s 2025 corporate run-rate production to 16,200 boepd, growing to something in the range of 22,000-23,000 boepd in 2026, and potentially approaching 30,000 boepd in 2027 — and with 2025 almost behind us, analysts will start talking about those 2027 numbers in just a few months. In a nutshell, this is a great growth addition to TNZ’s production and cash flow profile, adding runway to 2027 and beyond.
The deal was funded through cash on hand, the placement of a second tranche of senior secured notes on the same terms as the ones issued late in 2024 (now totalling CDN$305mm, with a November 2029 maturity), and $17mm of equity issued to the sellers. In terms of per share production, 2P reserves, and funds flow from operations, the deal is accretive to the tune of 31%, 23%, and 45% respectively, while decreasing consolidated unit operating costs and G&A by 23% in 2026. Consolidated pro forma net debt is around $400 million (including the NOBV contingent earn-out liability as net debt), which represents ~0.9x 2026 net-debt-to-EBITDA, and TNZ has established an undrawn $115 million reserves based lending facility backed by National Bank, CIBC, and Goldman Sachs. In terms of per share after-tax NPV10 numbers (net of all-in debt), TNZ’s 1P NAV is ~$28/share while its 2P NAV is just shy of $50/share (note: those numbers are likely understated in light of the 1) NOBV earn-out liability and 2) the lower costs and identified optimizations/development opportunities that TNZ has already realized on the NOBV assets, so stay tuned for an update in early 2026). Because of the development nature of the GEMS assets the deal is neutral on a PDP/share basis (ignoring the NOBV earn-out), but here’s the kicker… there is $306 million (risked) to $546 million (unrisked) of additional upside via low-risk (avg. 55% chance of development) prospects that can be developed through the N05-A (in production) and N04-A (planned FID in 2026) platforms… that’s $11-19 per share of upside on top of the above numbers… and none of that includes any upside from exploration on the NOBV assets (undefined, but substantial) or the GEMS assets (55 mmboe net unrisked).
If your head is spinning from all the numbers, don’t worry about it. The key takeaway is that in two deals, TNZ now has 1) clear runway to 30,000 boepd, 2) current reserves of 37.5 mmboe on a PDP basis, ~61 mmboe on a 1P basis, and ~92 mmboe on a 2P basis, and 3) a substantial exploration portfolio with ~$20/share of NAV upside from the lowest-risk prospects within the GEMS acquisition alone. The GEMS assets are capable of very high flow rates, ranging from 20 mmcf/d per well to as much at 75 mmcf/d per well in a new play type/fairway that has only recently been defined by some great geological and geophysical work. Oh, and drilling on both the NOBV and GEMS assets will start in Q4 of this year, so get ready for operational updates going forward. Sweet.
Is Tenaz done with its roll-up strategy? Not by a long shot. The corporate goal is 50,000-100,000 boepd. Does the team continue to build per share value while capturing significant long-tail upside at zero cost to its shareholders? Absolutely.
TNZ continues to be a rare bird in the energy space, offering niche exposure to the best-priced gas markets in the world, sourced from an asset base of exceptional quality, with a value creation strategy being executed by one of the best teams in its sector. The capital appreciation that’s already occurred here pegs TNZ as the best performing energy stock on the TSX for two years running and the simple strategy of “buy, hold, and prosper” has been all investors have needed to employ. In time, I have little doubt that TNZ will join the $1 billion-plus market cap club, on its way to >$2 billion… and with the company’s laser-sharp focus on minimizing dilution per share, I think there’s still a lot of runway and blue skies ahead for TNZ holders…
TNZ has been a fantastic win thus far. Remember that the original thesis was simple here: bet on the jockey. I put my chips behind a first-rate management team, and that wager is paying off — in spades — and I know that’s the case for many of my readers out there as well.
And now, I find myself thinking it’s time to make a similar bet, but this time on myself, to take this whole process of identifying and talking about these kinds of opportunities to the next level. The final details are being nailed down, and I’ll be announcing the next chapter shortly…
Happy hunting.