“The positive vote recommendation from both ISS and Glass Lewis reinforces our belief that combining Obsidian Energy and Bonterra is in the best interests of both companies’ respective shareholders,” said Steve Loukas, Obsidian Energy’s Interim President and CEO. “The combined entity will create the Cardium Champion, having a far superior future than what either company could achieve on a standalone basis. Together, our lower cost structure and improved capital efficiency would generate substantially more free cash flow, allowing us to accelerate debt repayment, improve our financial position and provide a clear path to share price appreciation.”
Following its review of the Offer, ISS stated “[t]he rationale behind the proposed acquisition appears sound. It is anticipated that the merger of the two companies would create a top 20 Western Canadian oil producer with a lower debt-to-EBITDA, higher free cash flow, and a stronger overall business. The combined company would be the largest Cardium-focused firm and should be positioned to be a Cardium consolidator with the ability to pursue further synergies from follow-on transactions. Furthermore, the combined company should be able to reduce its debt ratios and an improved financial outlook should improve its access to capital. Finally, the combined company is expected to benefit from synergies of around $50 million after the first year. In light of these benefits, shareholder approval of this resolution is warranted.”
Glass Lewis also commented that “[t]he combined company would likely stand to benefit from having enhanced scale and a strong balance sheet, which in turn could improve its standing with investors, enhance its ability to pursue follow-on acquisitions and provide it with greater access to capital.”
Vote FOR the Creation of the Cardium Champion
Obsidian Energy recommends that its shareholders vote FOR the Issuance Resolution at the Meeting. A vote FOR the Issuance Resolution will be a step towards creating the Cardium Champion, a combined entity with greater size, improved financial metrics, increased capital markets relevance and enhanced positioning for future Cardium consolidation, relative to either Obsidian Energy or Bonterra continuing on a standalone basis. For further details of the Issuance Resolution, Obsidian Energy shareholders are encouraged to carefully read the Company’s management information circular dated October 16, 2020 (the “Information Circular”), which is available in Canada on SEDAR at www.sedar.com, in the United States on EDGAR at www.sec.gov and on the Company’s website at www.obsidianenergy.com.
The Meeting will be held at the corporate head office of Obsidian Energy, located at 200 – 207 9th Avenue SW Calgary, Alberta on Monday, November 23, 2020, at 9:00 a.m. (Mountain Standard Time) to consider and, if thought advisable, to pass, with or without variation, the Issuance Resolution and to transact such further and other business as may properly be brought before the Meeting or any adjournment or postponement thereof.
Although Obsidian Energy currently intends to hold the Meeting in-person, due to restrictions on gatherings implemented by the Government of Alberta in response to the continually evolving COVID-19 (Coronavirus) outbreak, guidelines issued with respect to social distancing and out of concern for the wellbeing of all participants, we strongly recommend that shareholders not attend the Meeting in-person. Any person attending the Meeting will be required to follow the Company’s health and safety measures, which will include physical distancing, use of personal protective equipment (including mandatory use of facemasks) and completion of a health-assessment prior to being admitted to the Meeting. The precautionary measures being taken by the Company are intended to reduce the potential risks associated with the COVID-19 pandemic, and they may be further updated as necessary to take into account evolving recommendations and directives of public health authorities. In the event it is not possible or advisable to hold the Meeting in person, we will announce alternative arrangements for the Meeting as promptly as practicable, which may include holding the Meeting entirely by electronic means, telephone or other communication facilities. Please monitor our website at www.obsidianenergy.com for updated information.