Tamarack Valley, Sure Energy Combine Businesses
To acquire all issued and outstanding shares and assume net debt.
Tamarack Valley Energy Ltd. (TSXV: TVE) will acquire all of the issued and outstanding shares of Sure Energy Inc. (TO: SHR), the companies announced on Aug. 20.
Sure Energy is a public company that has built a significant, Viking focused, land base and development well inventory in the Redwater area of Alberta. Pursuant to the transaction, Sure Energy shareholders will receive 0.1050 of a Tamarack common share for each Sure Energy common share held. In aggregate, Tamarack will issue some 6.4 million Tamarack Shares to existing Sure Energy shareholders and assume net debt, as at July 31, of C $32 million for total consideration of $50.3 million, based on the offering price and including Sure Energy transaction costs of $2.5 million. The transaction will be effected by way of a plan of arrangement under the Business Corporations Act (Alberta). The board of directors of Sure Energy have unanimously approved the transaction and shareholders representing 37.9% of the issued and outstanding Sure Energy shares, including the management and board of directors of Sure Energy, have entered into agreements with Tamarack pursuant to which they have agreed to vote their shares in favor of the transaction.
In addition to the transaction, Tamarack has entered into a major farm-in and option agreement dated effective Aug. 1 with an industry major to earn 70% working interest in up to 113 net sections of highly prospective Cardium lands directly offsetting proven ongoing development projects in the greater Pembina area. With 183 gross (128 net) Cardium locations identified on the farm-in lands, the farm-in agreement increases Tamarack's Cardium inventory by 350%. The farm-in agreement is an efficient low cost means of managing risk and securing a scalable multiyear economic development project which will improve the operating cost structure through access to the farmor's existing infrastructure and favorable processing fees.
Concurrent with the transaction, Sure Energy has entered into a bought deal private placement offering of subscription receipts of Sure Energy for aggregate gross proceeds of $25 million with a syndicate of underwriters led by Dundee Capital Markets. Upon satisfaction of certain conditions, including satisfaction or waiver of all conditions to the completion of the plan of arrangement, each subscription receipt shall, without any further action or payment on the part of the holder thereof and pursuant to the plan of arrangement, automatically be converted into one Sure Energy share which will then be immediately exchanged for Tamarack shares on the basis of 0.1050 Tamarack shares for each Sure Energy share held. Pursuant to the offering, 96.2 million subscription receipts will be sold by the underwriters at a price of $0.260 per subscription receipt which, upon completion of the plan of arrangement, will result in the issuance of some 10.1 million Tamarack shares at an equivalent price of $2.476 per Tamarack share. Net proceeds will be used to fund 2013 and 2014 capital expenditures, post-closing of the transaction, and general corporate purposes.
Sure Energy Transaction Summary
Tamarack and Sure Energy shareholders will benefit from the combination of complementary Redwater Viking acreage, Tamarack's proven operations efficiencies and further synergies, including scalability of drill programs to help continue to drive down Viking well capital costs. Through the doubling Tamarack's land position in the Redwater Viking, Tamarack will hold 200 net locations which equates to a 7.7 year drilling inventory based on its projected 12 month forward drilling program.
Sure Energy Inc. is an independent energy company engaged in the acquisition, exploration, development, and production of oil and natural gas reserves primarily in the provinces of Alberta and Saskatchewan. The company is headquartered in Calgary.
Tamarack Valley Energy Ltd. is an independent energy company engaged in the identification, evaluation, and operation of resource plays in the western Canadian sedimentary basin. The company is based in Calgary.