- Offer to purchase Bonterra extended to January 25, 2021
- Minimum tender condition lowered to 50% of Bonterra Energy Corp.’s outstanding shares
- Improved valuation following Obsidian Energy Ltd. share price up 110% in the last month, compared to 4% for Bonterra Energy Corp.
CALGARY, AB – OBSIDIAN ENERGY LTD. (TSX: OBE) (OTCQX: OBELF) (“Obsidian Energy” or the “Company“) today announced that the Company has extended its offer (the “Offer“) to purchase all of the issued and outstanding common shares (the “Bonterra Shares“) of Bonterra Energy Corp. (TSX: BNE) (“Bonterra“) to 5:00 p.m. (Mountain Standard Time) on Monday, January 25, 2021. The extension provides Bonterra shareholders an additional opportunity to fully evaluate the Offer’s ability to create a stronger, well-positioned company with a far superior future, reflect on recent changes in the relative value of Obsidian Energy and Bonterra, and recognize the positive impact of recent industry consolidation announcements on share price performance.
“Our Offer is a compelling opportunity for Bonterra shareholders to be part of an efficient, competitive company with a solid future,” said Stephen Loukas, Obsidian Energy’s Interim President and CEO. “Since we made our original offer, industry consolidation has accelerated over the past few months as boards seize opportunities to build increased scale, efficiency and resilience. We expect this trend to continue and we urge Bonterra shareholders to take advantage of this opportunity. Together, we can make a stronger entity that can make meaningful improvements to cash flow and inroads to lower debt levels, which we believe has a clear path to a higher share price.”
In Canada, recent consolidation announcements have spanned companies of all sizes, including the merger of large cap companies Cenovus Energy Inc. and Husky Energy Inc., and an accelerated pace of consolidation in the mid-cap space with recent transactions announced by Whitecap Resources Inc., Tamarack Valley Energy Ltd. and Tourmaline Oil Corp. Obsidian Energy’s Offer builds on this industry consolidation activity, creating a highly competitive, efficient combined entity that management believes will be uniquely positioned as the natural consolidator in the Cardium and be able to benefit from further consolidation opportunities. Together, complementary assets and combined resources are expected to result in significant efficiencies. Obsidian Energy estimates that the combined entity can save approximately $50 million in the first year (equivalent to more than 80% of the value of all the outstanding Bonterra Shares) and a total of $100 million in the first three years.
Over the past month, Obsidian Energy’s share price has more than doubled as the market recognized the Company’s continued strong operational and financial performance, an improved oil price outlook and the initiation of a winter drilling program. In addition, the share price reflected strong shareholder approval of the share issuance related to the Offer and recommendations in support of the Offer by independent proxy advisory firms to Obsidian Energy’s shareholders. Management believes the Offer has always been compelling for Bonterra shareholders, providing strong operational synergies that are expected to lower corporate breakeven prices, improve the combined entity’s financial performance and drive significant anticipated share price improvement. Now, with the Company’s improved share price, the Offer exchange ratio of two (2) Obsidian Energy shares (the “Obsidian Shares“) for each Bonterra share aligns with current trading levels for Bonterra and Obsidian Energy.
Bonterra Price & Implied Obsidian Offer Performance Overview
Price performance since the day prior to Obsidian announcing proposed combination
Source: Factset as at 12/18/2020
Obsidian Energy also lowered the minimum tender condition of the Offer so that the Bonterra Shares validly deposited to the Offer, and not withdrawn, must represent greater than 50% (versus 66 2/3%) of the then outstanding Bonterra Shares (on a fully diluted basis). This amendment is being made based on current market intelligence regarding the Offer, discussions with investors, feedback from advisors and historic voting results of Bonterra shareholders.
Stephen Loukas continued, “Bonterra had a low voter turnout at their most recent Annual General Meeting; by lowering the tender threshold, we improve the chance of success for Bonterra shareholders to take action and support the transaction. We are aware that there is currently a sizeable percentage of Bonterra shareholders who have yet to decide on the Offer, and we believe the strength of the combination and the recent trading prices of Bonterra and Obsidian Energy make this a highly desirable transaction for Bonterra shareholders.”
Obsidian Energy recommends that Bonterra shareholders accept the Company’s compelling Offer to acquire all Bonterra Shares by tendering their shares: two (2) Obsidian Shares for each Bonterra Share tendered. The proposed combination represents an important step to creating the “Cardium Champion”, a combined entity with greater size, improved financial metrics, increased capital markets relevance and enhanced platform for future Cardium consolidation. The combined entity will be better positioned than either Obsidian Energy or Bonterra on a standalone basis. Additional details regarding the Offer can be found 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. As well, a Notice of Extension, Variation and Change that sets out the variations and changes to the Offer described herein, along with certain other variations and updated disclosures with respect to the Offer will be filed with Canadian securities regulators in due course this week.
ABOUT THE OFFER
The Offer is open for acceptance until 5:00 p.m. (Mountain Standard Time) on Monday, January 25, 2021, unless extended, accelerated or withdrawn.
As set out in further detail in the original take over bid circular dated September 21, 2020, as varied by a Notice of Extension, Variation and Change to be filed with Canadian securities regulators in due course this week (collectively, the “Offer Documents”), the Offer is subject to certain conditions, including: that the Bonterra Shares validly deposited to the Offer, and not withdrawn, represent more than 50% of the then outstanding Bonterra Shares (on a fully-diluted basis) and certain regulatory and third party approvals (as outlined in the Offer Documents) have been obtained, and other customary conditions. Subject to applicable law, Obsidian Energy reserves the right to withdraw, accelerate or extend the Offer and to not take up and pay for any Bonterra Shares deposited under the Offer unless each of the conditions of the Offer is satisfied or, if applicable, waived by Obsidian Energy at or prior to the expiry of the Offer. Bonterra shareholders are strongly encouraged to read the Offer Documents carefully and in their entirety, since they contain additional important information regarding Obsidian Energy and the terms and conditions of the Offer as well as detailed instructions on how Bonterra shareholders can tender their Bonterra Shares to the Offer. Bonterra shareholders can also view the Offer specific webpage on Obsidian Energy’s website, where they can review the Offer presentation, letter to Bonterra shareholders and other key information related to the Offer.