Twin Butte, Emerge To Unite Into Canadian Entity With 30 MMBOE Proved

Transaction Type
Sellers
Buyers
Announce Date
Post Date
Estimated Price
170MM
Description

To merge with company holding large resource block in W SK and E AB, including more than 250,000 net acres of undeveloped lands, gaining 5,800 BOE/d and created entity with combined 13,500 BOE/d, 30 MMBOE proved.

Twin Butte Energy Ltd., Calgary, (Toronto: TBE) plans to acquire Emerge Oil & Gas Inc., Calgary, (Toronto: EME) for approximately C$170 million in stock.

The deal values production at $29,250 per barrel equivalent per day, proved reserves at C$24.14 per barrel equivalent and proved and probable reserves at $13.05 per barrel equivalent, according to Twin Butte.

Twin Butte will issue 0.585 share per Emerge share, representing a deemed price of C$1.15 per Emerge Share, a 21% premium to the five day weighted average price of C$0.95 for the Emerge shares on Nov. 11. Twin Butte will issue approximately 54 million shares (at a deemed price of C$1.97 per share) and the assumption of approximately $63 million in net debt estimated at closing.

The assets includes a large resource block in western Saskatchewan and the eastern plains of Alberta, including more than 250,000 net acres of undeveloped lands. At greater Lloydminster, Emerge has a conventional heavy oil operation currently producing 5,800 barrels equivalent per day, with an established, drill ready inventory in excess of 250 net locations.

Pro forma, the combined entity will have production of approximately 13,500 barrels equivalent per day (70% heavy oil). Prove reserves at year-end 2010 were 30 million barrels equivalent and proved and probable reserves were 51.1 million barrels equivalent.

The combined assets will feature more than 500 heavy oil drilling locations in areas that have seen low recovery factors to date providing significant upside potential for long term reserve appreciation;

Twin Butte's existing executive team, led by Jim Saunders, will continue to manage the combined company, supplemented by key technical and administrative personnel from Emerge. At closing, Twin Butte will have approximately 189.4 million shares outstanding with Twin Butte shareholders owning approximately 71% and Emerge shareholders owning approximately 29% of the combined company. Tom Greschner, Emerge's chairman, president and chief executive, will be appointed to the Twin Butte board at closing.

Peters & Co. Ltd. is financial advisor to Emerge. GMP Securities LP is financial advisor to Twin Butte.

The deal is expected to close in mid-January.