To Acquire Waldron Energy Corp. (TSE:WDN) To Form a Diversified Junior Development And Exploration Company
Alberta, Aug 2, 2013 AEST (ABN Newswire) - Montana Exploration Corp. ("Montana") (
CVE:MTZ) and Waldron Energy Corporation ("Waldron") (TSE:WDN) are pleased to announce that they have entered into an arrangement agreement (the "Arrangement Agreement") pursuant to which Montana will acquire all of the issued and outstanding common shares of Waldron (the "Arrangement"). Under the Arrangement, shareholders of Waldron may elect to receive: (a) 1.8 common shares of Montana for each Waldron share held (a "Waldron Share"); or (b) $0.45 cash for each Waldron Share held; or (c) a combination of common shares of Montana and cash, subject to potential proration (as described below).
The consideration offered for the Waldron Shares pursuant to the Arrangement represents a 23% premium to the closing price of the Waldron Shares on the Toronto Stock Exchange ("TSX") on July 31, 2013 of $0.365 and a premium of 43% to the 30 trading day volume weighted average trading price. The combined asset base following completion of the Arrangement will consist of liquids rich natural gas development opportunities in west central Alberta, a Shaunavon light oil exploration play in the State of Montana and low decline natural gas production from the Eagle formation in the State of Montana. At closing of the Arrangement, total base production will be approximately 2,200 boe/d (25% liquids).
Montana has entered into equity subscription agreements with its controlling shareholders to raise aggregate gross proceeds of $25 million at a price of $0.25 per share of Montana (the "Private Placement"). The closing of the Private Placement is conditional upon the closing of the Arrangement and the receipt of all necessary regulatory approvals, including the TSX Venture Exchange. The proceeds from the Private Placement will be used to fund the cash portion of the consideration for the Arrangement, reduce combined bank debt and fund a portion of Montana's future capital program. Montana has received a term sheet from a Canadian financial institution for a reserves based credit facility for $30 million (the "Facility") to be available upon closing of the Arrangement. The combination of the Private Placement and the Facility will allow Montana to execute a focused development plan for the remainder of 2013 and 2014.
Completion of the Arrangement is conditional on customary closing conditions and is subject to conditions precedent with respect to net indebtedness of Waldron, including transaction costs, at closing and production for the month of June, 2013.
The cash consideration payable pursuant to the Arrangement is subject to potential proration. Provided that the aggregate net indebtedness of Waldron, including transaction expenses, is less than or equal to $35.5 million immediately prior to closing of the Arrangement, shareholders of Waldron will be permitted to elect the cash consideration for 100% of their shares of Waldron.
To the extent the aggregate Waldron indebtedness, including transaction expenses, exceeds $35.5 million immediately prior to closing of the Arrangement, the aggregate cash consideration available for election by Waldron's shareholders will be reduced on a one for one basis for each dollar in excess of $35.5 million and if the amount exceeds $36.5 million, on a two for one basis for each dollar in excess of $35.5 million; to the extent shareholders of Waldron elect to receive more cash than available, the cash consideration will be subject to proration. Waldron expects net indebtedness, including transaction expenses, to be less than or equal to $35.5 million immediately prior to closing.
All outstanding share options and share purchase warrants of Waldron at the effective time of the Arrangement will be cancelled for no consideration pursuant to the Plan of Arrangement.
APPROVALS
The Arrangement will be carried out by way of a court approved plan of arrangement and will require the approval of, among others, the holders of at least 66% of the Waldron Shares present in person or represented by proxy at a special meeting of Waldron shareholders (the "Waldron Meeting") to be called to consider the Arrangement. The Arrangement is also subject to obtaining the approval of a majority of the votes cast by the holders of Montana shares at the annual and special meeting of Montana shareholders (the "Montana Meeting") to be called to consider the issuance of Montana shares in connection with the Private Placement and the approval of the Arrangement. In addition to shareholder and court approvals, the Arrangement is subject to applicable regulatory approvals and the satisfaction of certain other closing conditions customary in transactions of this nature, including stock exchange approvals.
Further information regarding the Arrangement will be contained in a joint information circular that Montana and Waldron will prepare, file and mail in due course to their respective shareholders in connection with the Montana Meeting and Waldron Meeting. It is expected that the Montana Meeting and Waldron Meeting will take place in late September, with closing of the Arrangement expected to occur at the end of September. Further details regarding the respective shareholders' meetings will be provided in the joint information circular. All shareholders are urged to read the information circular once it becomes available as it will contain additional information concerning the Arrangement.
Complete details of the Arrangement are set out in the Arrangement Agreement, which will be filed by each of Montana and Waldron with SEDAR and will be available for viewing under each company's respective profile at www.sedar.com.
BENEFITS OF THE ARRANGEMENT
The board of directors of Montana believes that the combined entity, with its improved balance sheet, will have the means to execute the remaining 2013 and 2014 capital expenditure program, consisting of a balance between targeted base development as well as high impact exploration opportunities. The capital expenditure program for the remainder of 2013 will be to drill one exploration well in west central Alberta that is required to meet Waldron's flow through commitment as well as participate in the Shaunavon oil drilling program being conducted by Montana's farm-in partner, which partner has committed $2 million of the first $3 million of drilling on the Shaunavon program that is scheduled to begin in August of this year. To date, six locations have been surveyed and licenses received which will allow for sequential drilling on the Montana lands during the remainder of 2013.
Management of Montana has determined, based on its business model, that the development of the combined assets is sustainable and has highlighted a few of the key forecasted attributes below:
Pro Forma Operational and Financial Data
- Production on closing of approximately 2,200 boe/d (25% liquids)
- Total proved producing reserves of approximately 3.7 million boe, future net revenue of $48 million (discounted at 10%)(1)
- Total proved reserves of approximately 5.3 million boe, future net revenue of $56 million (discounted at 10%)(1)
- Total proved plus probable reserves of approximately 10.9 million boe, future net revenue of $86 million (discounted at 10%)(1)
- Undeveloped land (net) of 190,000 acres
- Approximately 185 million(2) Montana shares outstanding following the completion of the Arrangement
- Credit facility capacity of $30 million
Notes:
(1) Reserves information from reserves reports prepared by GLJ Petroleum Consultants Ltd. for each of Montana and Waldron, each with an effective date of December 31, 2012.
(2) Assuming the maximum allowed cash election under the plan of arrangement and the issuance of 100 million common shares of Montana under the Private Placement. The number of Montana shares outstanding on closing of the Arrangement may be different depending on the elections made by the Waldron shareholders.
Management intends to set a formal budget upon closing of the Arrangement. The future capital program over the next 24 month period will be dependent on the cash position of the combined entity on closing once the final share and cash consideration is determined. The budget will implement a focused capital program for the remainder of 2013 and into 2014 designed to balance debt repayment with capital expenditures. With a modest, high impact targeted capital program for the remainder of 2013 and 2014 focused on development opportunities on the Waldron lands and exploration opportunities in Montana, Montana believes it is positioned for growth in production, cashflow and reserves while at the same time reducing leverage. Montana expects to protect a portion of its base production with an active hedging program potentially utilizing a combination of fixed price swaps and participating products designed to reduce cashflow volatility and maintain a base cashflow available to fund the capital program.
Montana expects to continue looking for opportunities to expand its investor base and pursue strategic acquisitions targeting undervalued asset bases that complement Montana's business. Montana's management and board of directors believe the proposed transaction will result in a combined entity that has improved access to capital which will be utilized to develop and explore oil and natural gas properties in Canada and the United States.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The board of directors of Waldron has unanimously approved the Arrangement and, based in part on the verbal fairness opinion from National Bank Financial Inc. (as discussed below), unanimously determined that the Arrangement is in the best interests of Waldron. Each of the directors and officers of Waldron, representing in aggregate approximately 17% of the issued and outstanding Waldron Shares (on a non-diluted basis), has agreed to vote their Waldron Shares in favour of the Arrangement at the Waldron Meeting.
The board of directors of Montana has unanimously approved the Arrangement and unanimously determined that the Arrangement is in the best interests of Montana. Each of the directors (or their holding company through which they hold Montana Shares), officers and controlling shareholders of Montana, representing in aggregate approximately 70% of the issued and outstanding Montana shares (on a non-diluted basis), has agreed to vote their Montana shares in favour of the resolutions to be considered by shareholders of Montana at the Montana Meeting.
Under the terms of the Arrangement Agreement, each of Montana and Waldron shall not solicit or initiate any inquiries or discussions regarding any other business combination or sale of assets, subject to the fiduciary duty of the Montana or Waldron board of directors, respectively, in the event that an unsolicited superior proposal is received by either Montana or Waldron.
Both Montana and Waldron have agreed to pay a non-completion fee of $1.2 million to the other in certain circumstances as set forth in the Arrangement Agreement.
MANAGEMENT
Montana will continue to be led by its existing management team of Charles Selby as Executive Chairman and CEO, Don Foulkes as President, Don Jackson as Executive Vice President and COO and Bradley Plosz as Vice President Finance and CFO. At the Montana Meeting, among other matters, the shareholders of Montana will elect the board of directors of Montana for the ensuing year which will include Charles Selby, Don Foulkes, James Collins, Julian McIntyre, Dr. Alex Kulpec and Michael Hibberd.
ADVISORS
Cornerstone Capital Partners LP acted as advisors in regards to the Private Placement and Macquarie Capital Markets Canada Ltd. and Cornerstone Capital Partners LP acted as financial advisors to Montana with respect to the Arrangement. Bennett Jones LLP acted as legal counsel to Montana.
National Bank Financial Inc. acted as financial advisor to Waldron in respect of the Arrangement and has provided the board of directors of Waldron with the verbal opinion that, as of the date hereof and subject to its review of the final form of the documentation effecting the Arrangement, the consideration to be received by Waldron shareholders pursuant to the Arrangement is fair, from a financial point of view, to Waldron shareholders. Gowling Lafleur Henderson LLP acted as legal counsel to Waldron.
To view the release, please visit:
http://media.abnnewswire.net/media/en/docs/75666-montana_Waldron.pdf
Contact
Montana Exploration Corp.
Charles Selby, Chairman & CEO
Telephone: +1-403-265-9091
Email: Info@altacanada.com
Waldron Energy Corporation
Ernie Sapieha, President & CEO
Telephone: +1-403-532-6700
Email: esapieha@waldronenergy.ca
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