2010-08-10-2010-08-09

Transaction Type
Buyers
Announce Date
Post Date
Estimated Price
135MM
Description

To acquire Calgary-based E&P with international interests, gaining proved and probable oil and gas reserves of 19.1 million barrels of oil equivalent.

EnQuest Plc, London, (London: ENQ) plans to acquire Stratic Energy Corp., Calgary, (Toronto Venture; London Aim: SE) in an all-share transaction for C$135 million.

Stratic is a Canadian-incorporated international E&P company, with interests in the UK and Dutch sectors of the North Sea and in Turkey, Slovenia and Morocco. The company has proved and probable oil and gas reserves of 19.1 million barrels of oil equivalent. Producing assets include West Don Field in the UK North Sea and Ayazli and Akkaya Fields in Turkey.

Upside includes near-term development of its Crawford oil fields in the UK North Sea, Horizon West in the Dutch North Sea and further gas discoveries offshore Turkey, in addition to its portfolio of appraisal assets in the North Sea.

Based on the average closing price of EnQuest shares as of Aug. 2 of approximately C$1.90, the exchange ratio values each Stratic share at C$0.17, representing a 70% premium to the closing price of Stratic shares on the Toronto Venture Exchange of C$0.10. The total transaction value, including the assumption or repayment by EnQuest of Stratic's bank debt, 8.75% convertible debentures and 9% convertible notes, amounts to C$135 million.

Formed from the demerged UK North Sea assets of Petrofac Ltd. and Lundin Petroleum AB on April 6, EnQuest focuses on the UK Continental Shelf. As of Aug. 2, EnQuest's market capitalization is approximately C$1.5 billion. The company's assets include interests in the Thistle, Deveron, Heather, Broom, Don Southwest and West Don fields. It also has interests in 16 production licenses, which comprise 26 blocks or part blocks in the UKCS, of which 15 licenses are operated by the company.

EnQuest expects to produce approximately 18,000 barrels of oil per day in 2010. In its prospectus dated March 18, EnQuest reported total net proved and probable oil and gas liquids reserves of 80.5 million barrels as of Jan. 1.

Stratic's board has concluded that the proposed transaction with EnQuest is in the best interests of shareholders, debenture and note holders and other creditors, following a review of alternative options in the light of the company's high debt levels; disappointing production performance; the increased difficulty in selling its Crawford asset, resulting from the uncertainty created by the operator's failed London IPO announced on July 15; and the likelihood that further bank support may be required.

Stratic's current listings on the Toronto Venture Exchange and London Aim will terminate upon completion of the merger. The deal is expected to close by October.

Lazard & Co. Ltd. is financial advisor to Stratic and has provided a fairness opinion.