Penn West Energy Trust enters into an arrangement agreement to acquire Reece Energy Exploration Corp.
10 März 2009 - 6:18PM
PR Newswire (US)
CALGARY, March 10 /PRNewswire-FirstCall/ -- (TSX-PWT.UN; NYSE-PWE)
Penn West Energy Trust ("Penn West") and (TSXV-RXR) Reece Energy
Exploration Corp. ("Reece") jointly announce that they have entered
into an arrangement agreement (the "Arrangement Agreement") whereby
Penn West will acquire all of the outstanding shares of Reece. The
acquisition will be accomplished through a plan of arrangement (the
"Arrangement") wherein each Reece share will be exchanged for 0.125
of a Penn West trust unit. Including the assumption of Reece's
debt, the total acquisition cost is expected to be approximately
$92.2 million. Penn West will be reducing its 2009 capital program
by $40 million, being the amount of debt that Penn West anticipates
assuming pursuant to the Arrangement. Based on the volume weighted
average trading prices of Penn West's units and Reece's shares
during the 20 trading days ending on March 9, the exchange ratio
equates to a price of $1.39 per Reece share and represents a 50
percent premium to Reece's closing trading price on this date. The
Arrangement will provide Reece shareholders enhanced liquidity and
ownership in a large, light oil-weighted energy trust with strong
growth prospects and the ability to accelerate the exploitation of
Reece's prospect inventory. It is expected that approximately 4.6
million Penn West trust units will be issued to effect the
Arrangement. Completion of the Arrangement, which is anticipated to
occur in early May 2009, is subject to, among other things, the
approval of at least 66 2/3 percent of the Reece shareholders who
vote at a special meeting to be held in late April 2009, the
receipt of all necessary regulatory and stock exchange approvals,
and certain closing conditions that are customary for a transaction
of this nature. The board of directors of Reece has unanimously
determined that the proposed Arrangement is in the best interests
of and fair to Reece and its shareholders and recommends that Reece
shareholders vote in favour of the Arrangement at the upcoming
special meeting. Each of the directors and officers of Reece, who
collectively beneficially own or control approximately 25 percent
of the Reece shares, has entered into a support agreement pursuant
to which each has agreed to vote in favour of the Arrangement,
subject to the terms of such support agreement. The transaction is
expected to add current production of approximately 2,100 barrels
of oil equivalent per day to Penn West's production base, with
Reece's current production weighted approximately 67 percent to
light oil and natural gas liquids and 33 percent to natural gas.
Based on the volume weighted average trading prices of Penn West's
units and Reece's shares during the 20 trading days ending on March
9, the arrangement yields a price of approximately $43,900 per
flowing barrel of oil equivalent. Reece's primary property is
located in Kindersley, Saskatchewan and complements existing Penn
West operations in this area. The acquisition of Reece gives Penn
West a contiguous land position and additional production in its
Dodsland oil resource play. Both Penn West and Reece have very
encouraging results to date using horizontal multi-stage fracture
completion techniques in the area. Through this acquisition, Penn
West will also add approximately 75,000 net undeveloped acres to
its land base. Sayer Energy Advisors is acting as exclusive
financial advisor to Reece with respect to this transaction and has
advised the board of directors of Reece that, subject to review of
definitive legal agreements, they are of the opinion, as of the
date hereof, that the consideration to be received by the Reece
shareholders pursuant to the proposed Arrangement is fair, from a
financial point of view, to Reece shareholders. The Arrangement
Agreement prohibits Reece from soliciting or initiating any
discussion regarding any other business combination or sale of
material assets, contains provisions for Penn West to match
competing, unsolicited proposals and, subject to certain
conditions, provides for a $2.5 million termination fee payable by
Reece to Penn West. Penn West trust units and debentures are listed
on the Toronto Stock Exchange under the symbols PWT.UN, PWT.DB.B,
PWT.DB.C, PWT.DB.D, PWT.DB.E and PWT.DB.F and Penn West trust units
are listed on the New York Stock Exchange under the symbol PWE.
Forward-looking statements In the interest of providing Penn West's
unitholders, Reece's shareholders and potential investors with
information regarding Penn West and Reece, including management's
assessment of the future plans and operations of Penn West and
Reece, certain statements contained in this document constitute
forward-looking statements or information (collectively
"forward-looking statements") within the meaning of the "safe
harbour" provisions of applicable securities legislation.
Forward-looking statements are typically identified by words such
as "anticipate", "continue", "estimate", "expect", "forecast",
"may", "will", "project", "could", "plan", "intend", "should",
"believe", "outlook", "potential", "target" and similar words
suggesting future events or future performance. In addition,
statements relating to "reserves" or "resources" are deemed to be
forward-looking statements as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves and
resources described exist in the quantities predicted or estimated
and can be profitably produced in the future. In particular, this
document contains, without limitation, forward-looking statements
pertaining to the following: expectations of management regarding
the proposed acquisition of Reece, including the timing of
completion of the acquisition, operating and financial metrics of
the acquisition, potential synergies realized through the
transaction and the effect on Penn West's production, cash flow,
reserves, undeveloped land position and tax pools. With respect to
forward-looking statements contained or incorporated by reference
in this document, we have made assumptions regarding, among other
things: future capital expenditure levels; future oil and natural
gas prices and differentials between light, medium and heavy oil
prices; future oil and natural gas production levels; future
exchange rates and interest rates; the amount of future cash
distributions that we intend to pay; our ability to obtain
equipment in a timely manner to carry out development activities;
our ability to market our oil and natural gas successfully to
current and new customers; the impact of increasing competition;
our ability to obtain financing on acceptable terms; and our
ability to add production and reserves through our development and
exploitation activities. Although Penn West and Reece believe that
the expectations reflected in the forward-looking statements
contained in this document, and the assumptions on which such
forward-looking statements are made, are reasonable, there can be
no assurance that such expectations will prove to be correct.
Readers are cautioned not to place undue reliance on
forward-looking statements included in this document, as there can
be no assurance that the plans, intentions or expectations upon
which the forward-looking statements are based will occur. By their
nature, forward-looking statements involve numerous assumptions,
known and unknown risks and uncertainties that contribute to the
possibility that the predictions, forecasts, projections and other
forward-looking statements will not occur, which may cause Penn
West's or Reece's actual performance and financial 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. These risks and uncertainties
include, among other things, the following: that the Arrangement
may not close when planned or at all, or that it may ultimately
close based on financial metrics that are different than those
disclosed herein; the failure of Penn West and Reece to obtain the
necessary regulatory, shareholder and other third party approvals
required in order to proceed with the Arrangement; volatility in
market prices for oil and natural gas; incorrect assessment of the
value of the acquisition; failure to realize the anticipated
benefits of the acquisition; general economic conditions in Canada,
the U.S. and globally; and the other factors described under "Risk
Factors" in Penn West's most recently filed annual information form
available in Canada at http://www.sedar.com/ and in the U.S. at
http://www.sec.gov/. Readers are cautioned that this list of risk
factors should not be construed as exhaustive. The forward-looking
statements contained in this document speak only as of the date of
this document. Except as expressly required by applicable
securities laws, Penn West and Reece do not undertake any
obligation to publicly update or revise any forward looking
statements, whether as a result of new information, future events
or otherwise. The forward-looking statements contained in this
document are expressly qualified by this cautionary statement.
Barrels of oil equivalent Barrels of oil equivalent (boe) is
calculated using the conversion factor of 6 Mcf (thousand cubic
feet) of natural gas being equivalent to one barrel of oil. Boe may
be misleading, particularly if used in isolation. A boe conversion
ratio of 6 Mcf:1 bbl (barrel) is based on an energy equivalency
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. DATASOURCE: Penn
West Energy Trust CONTACT: PENN WEST ENERGY TRUST: Suite 200, 207 -
9th Avenue S.W., Calgary, Alberta, T2P 1K3, Phone: (403) 777-2500,
Fax: (403) 777-2699, Toll Free: 1-866-693-2707, Website:
http://www.pennwest.com/; Investor Relations: Toll Free:
1-888-770-2633, E-mail: ; William Andrew, CEO, Phone: (403)
777-2502, E-mail: ; Jason Fleury, Manager, Investor Relations,
Phone: (403) 539-6343, E-mail: ; REECE ENERGY EXPLORATION CORP.:
200, 1111 Kingsway Avenue, Medicine Hat, Alberta, T1A 2Y1, Website:
http://www.reeceenergy.com/, Phone: (403) 526-9700, Fax: (403)
527-9739; Lorne Swalm, President and Chief Executive Officer,
Phone: (403) 526-9700
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