Bonterra Energy Corp., is pleased to announce that it has made an offer (the “Offer”) to Spartan Oil Corp. (“Spartan”) pursuant to which Bonterra will acquire all of the outstanding common shares of Spartan (“Spartan Shares”) in exchange for common shares of Bonterra (“Bonterra Shares”) by way of a plan of arrangement under the Business Corporations Act (Alberta) (the “Arrangement”). The Arrangement will result in a dominant Cardium focused light oil producer with interests in the Greater Pembina area of Alberta.
While negotiations are ongoing, a binding agreement has not yet been signed. Therefore there can be no assurance that any transaction will result from these discussions, or as to the timing, structure or terms of any transaction.
The merger of Bonterra’s and Spartan’s asset bases is of strong strategic value for both of their respective shareholders as the resulting company will have one of the premier light-oil assets concentrated in the Pembina region, which will be comprised of a complimentary production base and a long-term inventory of drilling opportunities that is anticipated to drive future growth. The merger of Spartan and Bonterra is a unique opportunity for Spartan shareholders to participate, through their approximately 35% ownership, in an established dividend paying company that has demonstrable history of per share production and dividend growth through a variety of commodity cycles. The merger is anticipated to be accretive for Bonterra on a financial and operating basis and Bonterra expects to continue to demonstrate production per share growth and cash flow per share growth while maintaining a strong balance sheet.
- Pursuant to the Offer, Spartan shareholders will receive consideration of 0.1169 Bonterra Shares for each Spartan Share held (the “Exchange Ratio”). Based on Bonterra’s 30-day average closing price of $43.05, the implied price per Spartan Share is $5.03.
- As a part of the Arrangement, Bonterra has committed, subject to the execution of the definitive agreement and completion of the Arrangement, to increase its monthly dividend to $0.28 from $0.26 beginning March 2013. Subject to the transaction closing prior to February 15, 2013, Spartan shareholders will also receive a $0.26 per Bonterra share dividend on February 28, 2013. If Bonterra sustains its current effective yield of 7.2% following the dividend increase, Spartan shareholders can potentially realize an incremental $0.43 of value per Spartan Share. This amount, combined with the above share consideration, represents a 28% premium over the implied value of Spartan’s share price of $4.27 (as calculated by using the previous bidder’s closing price as at December 7, 2012 and the previous bidder’s proposed exchange ratio).
- Based on the Exchange Ratio, it is currently anticipated that Bonterra will issue approximately 10.7 million Bonterra Shares to the holders of Spartan Shares.
- Bonterra is one of the premier dividend paying companies in the western Canadian sedimentary basin and has increased its monthly dividend from 12 cents to 26 cents over the past four years. The combination of Spartan and Bonterra is a strategic consolidation opportunity that is expected to benefit both sets of shareholders. Bonterra, as demonstrated by its past track record of year-over-year growth on a per share basis, has shown a strong ability to manage Pembina Cardium assets to provide measured production growth while providing a sustainable dividend to its shareholders.
- Combined, Bonterra and Spartan would become one of the dominant light oil producers in the Pembina area with a strong asset position of low-risk development drilling opportunities. It is anticipated that the resulting company will have the following characteristics:
- A combined, sustainable, high-netback, production profile of approximately 11,500 BOE/D (approximately 75% liquids weighting), post declines from flush production (with Bonterra initially producing approximately 8,200 BOE/D and Spartan initially producing approximately 4,500 BOE/D)
- A strong balance sheet with an expected Debt / 2013 Cash Flow of approximately less than 1.1x
- A scalable, high quality, multi-year drilling inventory in excess of 10 years (assuming 4 wells per section), in the heart of the Pembina area
- It is anticipated that the Spartan shareholders, through their approximately 35% ownership in Bonterra post-Arrangement, will continue to realize further value creation through a measured production growth profile and a growth-oriented dividend policy.
AltaCorp Capital Inc. is acting as financial advisor to Bonterra in connection with the Offer.
The term barrels of oil equivalent (“BOE”) may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet per barrel (6mcf/bbl) of natural gas to barrels of oil equivalence is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All BOE conversions in the report are derived from converting gas to oil in the ratio mix of six thousand cubic feet of gas to one barrel of oil.
This press release contains certain statements or disclosures relating to Bonterra that are based on the expectations of Bonterra as well as assumptions made by and information currently available to Bonterra which may constitute forward-looking information under applicable securities laws. All such statements and disclosures, other than those of historical fact, which address activities, events, outcomes, results or developments that Bonterra anticipates or expects may, or will occur in the future (in whole or in part) should be considered forward-looking information. In some cases, forward-looking information can be identified by terms such as “forecast”, “future”, “may”, “will”, “expect”, “anticipate”, “believe”, “potential”, “enable”, “plan”, “continue”, “contemplate”, “pro-forma”, or other comparable terminology. In particular, this press release contains statements regarding the possible acquisition by Bonterra of all of the outstanding shares of Spartan, the indicative price of the Offer, the structure of the Arrangement, the anticipated benefits of the Arrangement, transaction rationale and information regarding the resulting company upon completion of the Arrangement. The foregoing statements assume a definitive agreement will be reached between Bonterra and Spartan and other required regulatory and shareholder approvals will be received, that there will be no changes to the assets and liabilities of the combined entity following the proposed Arrangement and that the anticipated benefits of and rationale for the Arrangement will be achieved. There is no assurance that all of the conditions to the transaction will be met and therefore there is a risk that the transaction will not be completed in the form described above or at all. Further, there is no assurance that the combined entity will achieve the results set forth in this release or that the benefits of the Arrangement will be realized. As such, many factors could cause the performance or achievement of Bonterra to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Because of the risks, uncertainties and assumptions contained herein, readers should not place undue reliance on these forward-looking statements.