CALGARY, June 15, 2015 /CNW/ -Petroamerica Oil Corp.
(TSX-V:PTA) ("Petroamerica"), and PetroNova Inc.
(TSX-V: PNA) ("PetroNova"), both Canadian oil and gas
companies operating in Colombia,
are pleased to announce that they have entered into an arrangement
agreement dated June 12, 2015 (the
"Arrangement Agreement") whereby Petroamerica has agreed to
acquire all of the issued and outstanding common shares of
PetroNova (the "PetroNova Shares") by way of a statutory
plan of arrangement under the Business Corporations Act
(Alberta) (the
"Arrangement"). Pursuant to the terms of the Arrangement
Agreement, holders of PetroNova Shares ("PetroNova
Shareholders") will receive 0.85 common shares of
Petroamerica ("Petroamerica Shares") for each PetroNova
Share held (the "Exchange Ratio"). (Note: all financial
amounts are reported in United
States Dollars unless otherwise indicated.)
Based on Petroamerica's closing price on June 12, 2015 of CDN$0.115 per share, the Exchange Ratio reflects
a value of CDN$0.098 per PetroNova
Share representing a 15% premium over PetroNova's closing price on
June 12, 2015 of $0.085 and a 45% premium over PetroNova's 10-day
volume weighted average trading price. The Arrangement is expected
to close on or around July 29, 2015,
provided all required PetroNova Shareholder, court, stock exchange
and regulatory approvals are obtained.
KEY ATTRIBUTES OF PETRONOVA:
- PetroNova operates and holds a 75% and 40% working interest
("W.I.") in the PUT-2 and Tinigua blocks in the
Caguán-Putumayo basin of Colombia
and holds a 20% non-operated W.I. in both the CPO-7 and CPO-13
blocks in the Eastern Llanos basin in Colombia.
- Significant prospective resource upside potential, especially
on the Tinigua block.
- Proved and probable ("2P") W.I. reserves (before
royalty) as at December 31, 2014 of
6.3 million barrels ("MMbbls") (after royalty 3.5 MMbbls)
with before-tax net present value (discounted at 10%) of
$67.2 million.
- All four of PetroNova's blocks have environmental licences in
place.
- PetroNova has exposure to 1.3 million gross acres in
Colombia with an extensive
portfolio of drill-ready prospects.
- PetroNova farmed out a 50% working interest in the Tinigua
block to a wholly owned subsidiary of Pacific Rubiales for
$12.5 million in back costs and
Pacific Rubiales will carry the cost of drilling, completing, and
testing of up to two wells for up to $19
million. Pacific Rubiales will also fund the cost of two
additional wells for $14 million, to
be paid back from PetroNova future production from these
wells.
- PetroNova holds a 75% operated W.I. in the PUT-2 block
(Petroamerica holding the other 25% working interest) which holds
multiple N-sand prospects and leads.
- The CPO-13 block is adjacent to the prolific Rubiales and Quifa
heavy oil fields and the heavy oil trend has been confirmed to
extend onto PetroNova's block.
- PetroNova's W.I production during the month of May 2015 averaged 304 barrels ("bbl") per
day ("bbls/d") of oil from two discoveries in the Llanos
basin.
- PetroNova assets have minimal near-term commitments and are
unencumbered.
For a description of the blocks and working interests of
PetroNova, see PetroNova's most recent Annual Information Form.
STRATEGIC RATIONALE:
"This acquisition ticks a number of boxes for Petroamerica,
delivering significant strategic, financial and operational
benefits, as well as medium to long-term growth potential for both
the Company and shareholders alike. PetroNova's portfolio is highly
complementary to our existing asset base bringing reserves,
near-term reserve growth potential, operatorship (of two blocks)
and significant exploration upside including one of the largest
undrilled foothills structures covered by 3D seismic in
Colombia. It further consolidates
our land position in the prolific N-sand play in the Putumayo Basin
with a 100% operated W.I. position in the PUT-2 block, and provides
exposure to a world class medium to heavy oil play in the Eastern
Llanos Basin, with two blocks abutting the significant oil fields
of Rubiales, Quifa and Caracara. PetroNova's blocks come with
minimal near-term commitments and given that Petroamerica is
currently debt free, we should find ourselves better positioned to
leverage these additional reserves in a debt market that continues
to improve" commented Ralph
Gillcrist, President and CEO of Petroamerica.
"PetroNova has an excellent portfolio of Colombian blocks
with significant growth potential and this transaction will result
in a stronger company with the increased ability to develop
PetroNova's assets, including the Tinigua block, resulting in
increased upside potential for our shareholders. PetroNova
shareholders will now be a part of a company that has increased
liquidity and the capital structure which positions it for future
growth" commented Antonio
Vincentelli, President and Chief Executive Officer of
PetroNova.
Benefits:
- Operatorship – PetroNova operates both the Tinigua and
PUT-2 blocks
- Adds a Material Catalyst – The first well in the Tinigua
block is expected to spud in the first half of 2016 targeting a
high impact prospect defined by 3D seismic where PetroNova will be
carried by Pacific Rubiales for the cost of drilling, completing
and testing the well.
- Consolidate PUT-2 Interest – The transaction would
consolidate Petroamerica's W.I. in the PUT-2 block to 100%,
providing further exposure to the prolific N-sand oil play in the
Putumayo Basin.
- Enhance Reserves – PetroNova's 6.3 MMbbls of 2P reserves
(W.I. before royalty), consisting of 17% light/medium oil and 83%
heavy oil, increases Petroamerica's before royalty W.I. reserve
base by 78% to 14.5 million barrels of oil equivalent
("MMboe") consisting of 63% light/medium oil, 36% heavy oil,
and 1% natural gas (after royalty – 10.8 MMboe) with before-tax net
present value (discounted at 10%) of $228.1
million as at December 31,
2014.1
- Extends Reserve Life – The addition of PetroNova's
discoveries significantly improve Petroamerica's reserve life
index.
- Rounds Out Prospect Inventory – Transaction adds a
number of exciting exploration prospects, leads and new plays with
significant resource exposure providing ample running room to
support future reserves and production growth.
- Strengthens Borrowing Base – With no debt outstanding
and a robust reserve base, Petroamerica will look to accelerate
future development and unlock value through cash-on-hand, future
cash flow, and the debt capital markets for appraisal and
development funding.
THE ARRANGEMENT
Under the terms of the Arrangement, each PetroNova Shareholder
will receive consideration of 0.85 Petroamerica Shares per
PetroNova Share.
It is anticipated that Petroamerica will issue an aggregate of
approximately 216 million Petroamerica Shares to PetroNova
Shareholders and assume $1.6 million
of PetroNova net debt, exclusive of transaction costs, in
connection with the Arrangement. Upon completion of the
Arrangement, it is anticipated that Petroamerica will have
approximately 1.089 billion basic Petroamerica Shares outstanding
and no debt. The total cost of the deal to Petroamerica, including
the assumption of working and transaction costs is approximately
CDN $29 million. It is the Company's
intention to implement the ten for one share consolidation,
previously approved by shareholders at the last Annual General
Meeting, shortly after closing the Arrangement.
Pursuant to the Arrangement Agreement, PetroNova will issue a
notice under its stock option plan giving the holders thereof 30
days to exercise all outstanding options (vested or unvested),
following which they will be cancelled. As of today, none of
PetroNova's outstanding options are in the money. In addition,
under the terms of the Arrangement Agreement, all holders of
PetroNova warrants will be entitled to receive Petroamerica Shares,
adjusted for the Exchange Ratio and the share consolidation, in
lieu of the number of PetroNova Shares otherwise issuable upon the
exercise thereof. Further, the holder of the one issued and
outstanding Series A Preferred Share of PetroNova will receive a
preferred share in the capital of Petroamerica with substantially
the same terms and provisions as the Series A Preferred Share.
Completion of the Arrangement is subject to customary closing
conditions, including requisite PetroNova Shareholder, court,
government and regulatory approvals. The Arrangement will need to
be approved by not less than two-thirds of the votes cast by
PetroNova Shareholders, and by a majority of votes cast by
PetroNova Shareholders after excluding the votes cast
by shareholders who are excluded shareholders under applicable
securities requirements, in person or by proxy at the special
meeting (the "PetroNova Meeting") of PetroNova Shareholders
to be held on or about July 28, 2015.
In addition, while not a condition of the completion of the
Arrangement, the Arrangement must also be approved by the holder of
the Series A Preferred Share of PetroNova. The Arrangement also
requires approval of the TSX Venture Exchange and of the Court of
Queen's Bench of Alberta.
The Arrangement Agreement provides for, among other things, a
non-solicitation obligation on the part of PetroNova, with a
customary "fiduciary out" provision that entitles PetroNova to
consider and accept a superior proposal, and a right in favour of
Petroamerica to match any superior proposal. If the
Arrangement Agreement is terminated in certain circumstances,
including if PetroNova enters into an agreement with respect to a
superior proposal or if the board of directors of PetroNova
withdraws or modifies its recommendation with respect to the
proposed Arrangement, Petroamerica is entitled to a termination
payment in cash of CDN$1.8 million.
PetroNova is also entitled to a reciprocal termination payment in
cash of CDN$1.8 million in certain
circumstances. Upon completion of the Arrangement one additional
director is expected to join the Petroamerica board, which
additional member shall be chosen by Petroamerica from among the
current directors of PetroNova, subject to TSX Venture Exchange
approval. A complete copy of the Arrangement Agreement will be
available under the respective issuer profiles of Petroamerica and
PetroNova on SEDAR at www.sedar.com.
The PetroNova board of directors, based on a recommendation by
the special committee established to consider the Arrangement, has
unanimously approved the Arrangement Agreement and, based on the
verbal fairness opinion of its financial advisor, Peters &
Co. Limited, determined that the consideration to be received
by the PetroNova Shareholders pursuant to the Arrangement is fair,
from a financial point of view, to PetroNova Shareholders,
determined that the Arrangement is in the best interests of
PetroNova, and resolved to unanimously recommend that PetroNova
Shareholders vote their PetroNova Shares in favour of the
Arrangement. The directors and senior officers of PetroNova and
certain PetroNova Shareholders that collectively hold approximately
19.2% of the issued and outstanding PetroNova Shares, have entered
into support agreements to vote their PetroNova Shares in favour of
the Arrangement at the PetroNova Meeting.
The Petroamerica board of directors has unanimously approved the
Arrangement Agreement. Black Spruce Merchant Capital
Corp. is acting as sole financial advisor to Petroamerica with
respect to the Arrangement. Approval of holders of Petroamerica
shares is not required to complete the Arrangement.
Full details of the Arrangement will be included in an
information circular of PetroNova to be mailed to PetroNova
Shareholders in accordance with applicable securities laws. A copy
of the aforementioned information circular and related documents
will be filed under PetroNova's issuer profile on SEDAR at
www.sedar.com at the applicable time.
For a complete description of PetroNova's assets, business and
financial matters, please visit their website at
www.PetroNova.com, and review their publicly disclosed
information available on PetroNova's issuer profile at
www.sedar.com.
Forward Looking Statements:
This news release includes information that constitutes
"forward-looking information" or "forward-looking statements". More
particularly, this news release contains statements concerning
expectations regarding the timing and successful completion of the
Arrangement, cash flow, business strategy, priorities and plans,
expected production, the evaluation of certain prospects in which
Petroamerica will hold an interest following the completion of the
Arrangement, estimated number of drilling locations, expected
capital program (including its allocation), production growth,
reserves growth, exploration upside, the receipt of and the timing
of receipt of environmental licenses, the ability of Petroamerica
to sell its crude volume and other statements, expectations,
beliefs, goals, objectives assumptions and information about
possible future events, conditions, results of operations or
performance. Readers are cautioned not to place undue
reliance on forward-looking statements, as there can be no
assurance that the plans, intentions or expectations upon which
they are based will occur. By their nature, forward-looking
statements involve numerous assumptions, known and unknown risks
and uncertainties, both general and specific, that contribute to
the possibility that the predictions, estimates, forecasts,
projections and other forward-looking statements will not occur,
which may cause actual performance and results in future periods to
differ materially from any estimates or projections of future
performance or results expressed or implied by such forward-looking
statements. Business priorities disclosed herein are
objectives only and their achievement cannot be guaranteed.
Material risk factors include, but are not limited to: the
inability to obtain regulatory approval for any operational
activities, inability to get all necessary approvals for completion
of the Arrangement, the risks of the oil and gas industry in
general, such as operational risks in exploring for, developing and
producing crude oil and natural gas, market demand and
unpredictable shortages of equipment and/or labour; potential
delays or changes in plans with respect to exploration or
development projects or capital expenditures; fluctuations in oil
and gas prices, foreign currency exchange rates and interest rates,
and reliance on industry partners and other factors, many of which
are beyond the control of Petroamerica. You can find an
additional discussion of those assumptions, risks and uncertainties
in Petroamerica's and PetroNova's Canadian securities
filings.
Neither Petroamerica, PetroNova nor any of their respective
subsidiaries nor any of their respective officers, directors or
employees guarantees that the assumptions underlying such
forward-looking statements are free from errors nor do any of the
foregoing accept any responsibility for the future accuracy of the
opinions expressed in this document or the actual occurrence of the
forecasted developments.
Readers should also note that even if the drilling program as
proposed by Petroamerica is successful, there are many factors that
could result in production levels being less than anticipated or
targeted, including without limitation, greater than anticipated
declines in existing production due to poor reservoir performance,
mechanical failures or inability to access production facilities,
among other factors.
Statements relating to "reserves" or "resources" are deemed
to be forward-looking statements or information, as they involve
the implied assessment, based on certain estimates and assumptions,
that the reserves or resources described can be profitable in the
future. There are numerous uncertainties inherent in
estimating quantities of reserves and resources, including many
factors beyond the control of Petroamerica or PetroNova. The
reserve and resource data included herein represents estimates
only. In general, estimates of economically recoverable oil
and natural gas reserves and resources and the future net cash
flows therefrom are based upon a number of variable factors and
assumptions, such as historical production from the properties, the
assumed effects of regulation by governmental agencies and future
operating costs, all of which may vary considerably from actual
results. All such estimates are to some degree speculative
and classifications of reserves are only attempts to define the
degree of speculation involved.
The assumptions relating to reserves are contained in the
reports of GLJ Petroleum Consultants Ltd. for Petroamerica and
Petrotech Engineering Ltd. for PetroNova each dated effective
December 31, 2014.
Estimates
Estimates of the net present value of future revenue are
based on forecast pricing and do not represent the fair market
value of the resources. The estimates of reserves and future net
revenue for individual properties may not reflect the same
confidence level of estimates of reserves and future net revenue
for all properties, due to the effects of aggregation.
Use of 'boe'
Throughout this press release, the
calculation of barrels of oil equivalent ("boe") is at a conversion
rate of 6,000 cubic feet ("cf") of natural gas for one barrel of
oil and is based on an energy equivalence conversion method. Boe
may be misleading, particularly if used in isolation. A boe
conversion ratio of 6,000 cf: 1 barrel is based on an energy
equivalence conversion method primarily applicable at the burner
tip and does not represent a value equivalence at the
wellhead.
The TSX Venture Exchange Inc. has in no way passed upon the
merits of the proposed Arrangement and has neither approved nor
disapproved the contents of this press release. Neither the
TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this
release.
1 Reserves disclosure contained in this press release
reflect the individual reserves reports of GLJ Petroleum
Consultants Ltd. for Petroamerica dated effective December 31, 2014 and the reserves report of
Petrotech Engineering Ltd. for PetroNova dated effective
December 31, 2014, which contain
different price and cost assumptions.Both reserves reports were
prepared in accordance with National Instrument 51-101 –
Standards for Disclosure of Oil and Gas Activities by
independent qualified reserves evaluators.
SOURCE PetroNova Inc.