Another new spinco. soon to apear as the elk gets dressed out. Acclaim appears to be doing a $174MM deal to acquire 6200 boepd from ELK. Just over $28,000 per flowing BOE, about $26,000 if land value is stripped out and $10 per proved BOE reserve.
Acclaim Energy Trust To Acquire Elk Point Resources
CALGARY, ALBERTA-- NOVEMBER 27, 2002 - 15:38 EST
Elk Point To Spin Junior Newco
Acclaim Energy Trust ("Acclaim") and Elk Point Resources Inc.
("Elk Point") jointly announced today they have entered into an
agreement for a business combination pursuant to a Plan of
Arrangement (the "Plan") whereby Acclaim will acquire all of the
issued and outstanding shares of Elk Point. All of Elk Point's
U.S. and certain minor Canadian properties will be transferred to
a separate company to be distributed to Elk Point's shareholders.
Acclaim will acquire all of the outstanding common shares of Elk
Point for $3.70 cash or 0.95 Acclaim trust units per Elk Point
share plus a share of a newly created company ("Newco") which
will hold certain assets of Elk Point. The shareholders of Elk
Point will have the option to elect cash or Acclaim trust units
subject to maximums of $15 million cash and 26.3 million units.
The total value of the Acclaim offer including assumed debt is
approximately $174 million, excluding the value attributable to
Newco.
Newco will consist of Elk Point's wholly-owned subsidiary
Bellevue Resources, Inc., which owns all of Elk Point's existing
United States-based oil and gas properties, and certain Alberta
based minor properties. Newco will have production of
approximately 325 boe/d, 30,000 net acres of undeveloped land,
several shut-in gas wells, and hold a one-year option to farm-in
on approximately 25,000 gross acres of Elk Point's undeveloped
lands being acquired by Acclaim. The production of Newco
represents approximately 5% of Elk Point's current production.
Members of the current Elk Point management team will form the
nucleus of the Newco management team using their familiarity with
the Newco prospects to optimize production and exploit Newco's
undeveloped and farm-in lands. Newco will have no debt and will
have the right to spend or receive $1.5 million of capital. "The
production of Newco provides the opportunity for Elk Point
shareholders to participate directly in the production and upside
of the retained properties in Newco" said Aidan Walsh, President
and CEO of Elk Point.
Acclaim is also pleased to announce it has entered into a
bought-deal financing with a syndicate of underwriters for an
offering of $45 million aggregate principal amount of convertible
extendible unsecured subordinated debentures (the "Debentures").
The Debentures, with a face value of $1,000 per debenture, will
have a coupon of 11.0%, a final maturity date if extended of
December 31, 2007 and be convertible into trust units of Acclaim
at a price of $3.90 per trust unit.
TD Securities has provided an underwritten credit facility in the
amount of $195 million that will replace Acclaim's existing
facilities, fund the acquisition and provide for future capital
requirements.
The properties acquired by Acclaim have a production rate of
approximately 6,200 boe/d and are characterized by high per
barrel margins due to premium revenue streams relating to high
heating content natural gas and light crude oil. The properties
include approximately 23 mmcf/d of natural gas and 2,400 bbls/d
of light crude oil.
The acquisition of Elk Point assets in west central Alberta
represents approximately 60% of the production acquired and is
very complimentary to Acclaim's core area in central Alberta
while 25% of the production is in the Peace River Arch adjacent
to Acclaim's northern properties.
/T/
Acclaim believes the acquisition provides the following financial
and operational benefits:
* Accretive to 2003 cash flow per unit by approximately 15%.
* Accretive to reserves per unit and production per unit.
* Accretive to Acclaim's net asset value.
* Further extension of Acclaim's tax deferred status beyond 2003.
* Attractive production and reserve acquisition costs, net of land
values, of $25,900 per boe/d, $8.75 per boe for established
reserves and $10.00 per boe for proven reserves.
* Addition of 16.2 mmboe of proven and 18.5 mmboe of established
reserves reviewed by Gilbert Laustsen and Jung Associates Ltd
with 82% of the proven reserves classified as proved producing
reserves.
* Increases Acclaim's natural gas production weighting to 53% while
reducing heavy oil from 12% to 8% of production.
* Significant increase in market liquidity and size with Acclaim
becoming the seventh largest conventional oil and gas trust in
Canada on the basis of production (21,400 boe/d proforma).
* After the issuance of the Debentures, Acclaim's senior debt to
cash flow will be reduced from 1.6 times to 1.4 times 2003
estimated cash flow.
* Substantial undeveloped land base of 135,000 net acres added to
the current undeveloped land base of 350,000 net acres.
* A number of exploitation opportunities have been identified and
will be pursued in 2003.
* Proforma established reserve life index of 9.5 years
/T/
"This transaction is beneficial to both shareholders of Elk Point
and unit holders of Acclaim," said Acclaim President and CEO J.
Paul Charron. "This transaction will contribute to Acclaim's
long-term stability and efficiency. Elk Point's assets are an
exceptional fit with Acclaim's production & exploitation
opportunities in central and northwest Alberta."
The boards of directors of Acclaim and Elk Point have unanimously
approved the transaction. The board of directors of Elk Point has
concluded that the transaction is in the best interests of Elk
Point's shareholders and has unanimously resolved to recommend
that shareholders vote in favour of the plan of arrangement. CIBC
World Markets Inc. is acting as Elk Point's financial advisor in
connection with the transaction and has provided the board with
its opinion that the consideration to be received by the Elk
Point shareholders is fair from a financial point of view.
Elk Point has agreed to pay Acclaim a fee of $5 million if the
transaction is not completed under certain circumstances. Elk
Point has also agreed to terminate discussions with other
parties, not solicit other transactions and has granted Acclaim
certain pre-emptive rights if other offers are received by Elk
Point.
Certain directors, officers and shareholders of Elk Point who, in
aggregate, own approximately 20% of the fully diluted Elk Point
shares have agreed to vote their shares in favour of the plan of
arrangement.
The transaction is subject to customary regulatory and other
approvals. Elk Point will call a special shareholders' meeting to
approve the plan of arrangement in late January 2003. The
information circular for the shareholder meeting is expected to
be mailed to Elk Point shareholders by mid-December.
FirstEnergy Capital Corp. and TD Securities Inc. are acting as
Acclaim's financial advisors in connection with this transaction.
CIBC World Markets is acting as financial advisor to Elk Point.
Bought Deal Financing
Acclaim has entered into an agreement to sell $45 million
principal amount of the Debentures on a bought deal basis. The
issue is being bought by a syndicate of underwriters led by
Scotia Capital Inc. and BMO Nesbitt Burns Inc., and including
CIBC World Markets Inc., FirstEnergy Capital Corp., and TD
Securities Inc.
The net proceeds of the offering will be used to fund the
acquisition of Elk Point, to reduce bank indebtedness and for
general corporate purposes. The initial maturity date of the
Debentures is March 31, 2003 with an automatic extension to
December 31, 2007 upon the closing of the Elk Point acquisition.
If the acquisition does not close on or before March 31, 2003 or
if the acquisition is terminated at an earlier time, the
Debentures will mature on the initial maturity date.
The offering of the Debentures is being made only in Canada by
means of a short-form prospectus and is subject to the approval
of securities regulatory authorities. The Debentures will not be
and have not been registered under the United States Securities
Act of 1933 and will not be offered or sold in the United States.
Conference Call and Investor Presentation
Acclaim and Elk Point will hold a joint conference call on
Thursday, November 28, 2002. The conference call will begin at
9:00 am Mountain Time (11:00 am Eastern Time). To participate,
please call 1-888-458-1598 (403-232-6311 local) and enter pass
code of 63246#. The conference call will be recorded and
available for review by calling 1-877-653-0545 (403-232-0933
local) and entering 167428# until December 7, 2002. An investor
presentation describing the proposed transaction will be
available on the Acclaim's web site at www.acclaimtrust.com.
Acclaim Energy Trust is a Calgary-based, open-end income trust
engaged in the development and acquisition of oil and gas
reserves in Western Canada. Acclaim distributes the resulting
cash flow on a 100% tax-deferred basis. The trust units trade on
the Toronto Stock Exchange under the symbol AE.UN. There are
currently 97.8 million trust units outstanding. |
