(Idea) Greenfire Resources - The Stock Is Undervalued
Please also read: (Idea) Greenfire Resources - One Of Our Favorite Energy Names
By: Jon Costello
Greenfire Resources (GFR) has agreed to acquire Connacher Oil and Gas for approximately C$1.28 billion in cash. I own Greenfire and have followed the company closely from its 2023 public listing through the investment by Waterous Energy Fund and to the recapitalization completed last December. My investment thesis has been that the shares traded at a substantial discount to the value of Greenfire’s long-lived oil sands reserves, provided management could stabilize production and fund the next phase of development.
This proposed Connacher acquisition reinforces that thesis, but it also increases the amount of execution required to realize it. Connacher’s Great Divide oil sands project is a logical asset for Greenfire to own, and the combination of the companies’ assets creates a larger platform with meaningful operating and development synergies.
Source: Greenfire Resources Connacher Oil & Gas presentation, July 2026.
However, the purchase price already gives Connacher credit for a favorable commodity price environment and for successful post-acquisition execution by Greenfire’s management. Given the announced price, I do not consider the acquisition itself to be cheap, but I continue to believe Greenfire shares are undervalued from a long-term perspective after giving effect to the transaction and associated financing.
Connacher’s Trip From Insolvency to a C$1.28 Billion Sale
Connacher entered creditor protection in 2016. In early 2019, a C$113.5 million sale failed, and the company’s first-lien lenders acquired it through a credit bid that September. The former equity was canceled, and Connacher has remained private ever since.
The lenders who acquired the company through that credit bid are now selling the business for approximately C$1.28 billion. Greenfire has not identified this group, so I will not speculate about the returns generated from this deal. The relevant point is that Greenfire is not buying from a distressed owner. The transaction marks a full exit for creditors who controlled the asset for nearly seven years, which argues for a conservative evaluation of the acquisition price.
Connacher Is an Unusually Strong Strategic Fit
Connacher’s Great Divide in-situ oil sands project sits directly adjacent to Greenfire’s Hangingstone operation. Both assets are produced from the McMurray formation and use the same regional pipelines. In this deal, Greenfire will combine two neighboring SAGD assets, rather than entering a new basin or operating model, thereby roughly doubling the company’s scale.
Great Divide’s Pod One and Algar processing facilities currently support approximately 20,000 barrels per day and are reported to have brownfield expansion potential toward 30,000 barrels per day, as shown below.
Pod One is the stronger of the two facilities, with a steam-oil ratio of 2.6x compared with 3.5x at Algar.
Greenfire’s management team also has an unusually high degree of familiarity with the asset, having spent more than fifteen years in prior roles at Connacher. That history reduces integration risk, although it does not eliminate operating risk.
Management has identified approximately C$30 million in annual savings from midstream, marketing, and operating costs, and G&A, while the combined company will have roughly C$2.8 billion in tax pools that should enable it to defer cash taxes until after 2030. These benefits strengthen the strategic rationale for the transaction, though they do not by themselves establish that Greenfire is acquiring Connacher below intrinsic value.