Anderson Energy Ltd. (TSX:AXL) has entered into agreements to sell 1,560 barrels of oil per day of production (75% natural gas) for cash consideration of $37.5 million subject to normal closing adjustments. Approximately $18.75 million of the transactions are scheduled to close before the end of October 2012 and the remainder are scheduled to close before the end of November 2012.
The company’s bank lines will step down to $70 million after the closing of the transactions. Pro forma the transactions, outstanding bank loans at September 30, 2012 would be approximately $52 million. The properties being sold are non-strategic assets of the company. Anderson has retained its position in both the large, well established Cardium light oil play and the emerging Second White Specks light oil play. The company’s current Cardium drilling inventory is 257 gross (177 net) locations of which 75 gross (56 net) wells have been drilled to date. The company’s Second White Specks horizontal light oil inventory is comprised of approximately 77 gross (42 net) additional locations. Anderson intends to resume its Cardium horizontal drilling operations with a one rig drilling program in the coming weeks.
Anderson had hedges of 1,500 barrels per day of oil (bopd) production for the balance of 2012 using fixed price swaps at an average price of $103.87 WTI Canadian per barrel. The company unwound 500 bopd of these hedges for the last two months of the year and realized a gain of $450,000, leaving 1,000 bpd of oil production hedged for November and December 2012 at an average price of $104.30. The company continues to monitor hedging opportunities for oil and natural gas for 2012 and 2013.
As previously announced, the board of directors has initiated a process to identify, examine and consider a range of strategic alternatives available to the company with a view to enhancing shareholder value. The strategic alternatives considered may include, but are not limited to, a sale of all or a material portion of the assets of Anderson, either in one transaction or in a series of transactions, the outright sale of the company, or a merger or other strategic transaction involving Anderson and a third party. The board of directors believes that the company’s shares trade at a significant discount to the value of the underlying assets, especially given its high quality oil production base, prospective horizontal oil drilling inventory and significant tax pools. The board of directors has established a special committee comprised of independent directors of the Company to oversee this process and has retained BMO Capital Markets and RBC Capital Markets as its financial advisors to assist the special committee and the board of directors with the process. The process was not initiated as a result of any particular offer.
The transactions are the second set of assets to be sold as part of the strategic alternatives process. It is Anderson’s current intention to not disclose developments with respect to its strategic alternatives process unless and until the board of directors has approved a specific transaction or otherwise determines that disclosure is necessary in accordance with applicable law. The company cautions that there are no assurances or guarantees that the process will result in additional transactions or, if a transaction is undertaken, the terms or timing of such a transaction. The company has not set a definitive schedule to complete its evaluation.
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