Statoil and Brigham Exploration announced Monday that they have entered into a merger agreement for Statoil to acquire all of the outstanding shares of Brigham for USD 36.5 per share through an all-cash tender offer.
The Brigham Board of Directors has unanimously recommended to its shareholders that they accept the offer. Ben "Bud" M. Brigham, Chairman, President and CEO and the other executive officers and directors of Brigham, who collectively own approximately 2.5% of the outstanding shares, have agreed to tender all of their shares.
The total equity value is approximately USD 4.4 billion, reflecting an enterprise value of approximately USD 4.7 billion, based on June 30, 2011 net debt.
Brigham, based in Austin, Texas, has over 100 employees in Austin and North Dakota and a strong position in the attractive Bakken and Three Forks tight oil plays in the Williston Basin in North Dakota and Montana.
"The US unconventional plays hold a substantial resource base and represent an increasingly important part of future energy supplies. Statoil has step by step developed industrial capabilities through early entrance into Marcellus and Eagle Ford. Entering the Bakken and Three Forks tight oil plays and taking on operatorship represents a new significant step for Statoil. We are positioning ourselves as a leading player in the fast growing US onshore oil and gas industry, in line with the strategic direction we have set out," said Helge Lund, President and CEO of Statoil.
The transaction will provide Statoil with more than 375,000 net acres in the Williston Basin, which holds potential for oil production from the Bakken and Three Forks formations. Brigham also holds interests in 40,000 net acres in other areas. At this early stage of development the risked resource base is estimated at 300-500 million barrels of oil equivalent (boe), equity. Current equity production is approximately 21,000 boe per day, and the acreage has potential to ramp up to 60,000-100,000 boe per day equity production over a five year period.
The Bakken and Three Forks formations are among the largest oil accumulations in the United States. Various sources have estimated the technically recoverable reserves to be in the range of 5 - 24 billion boe, over a 38,000 square kilometers area. The attractiveness of the Bakken and Three Forks plays has resulted in Statoil offering a 36% premium over the average trading price of Brigham stock for the last 30 days.
"A bigger enterprise with a larger balance sheet will be better positioned to take advantage of our large and growing inventory of Williston Basin drilling locations and the associated assets. We are excited to see this transaction completed and look forward to having our assets and employees integrate with the Statoil organization and the substantial asset position that they are growing in their U. S. onshore business," said Bud Brigham, Brigham Exploration's Chairman, President and CEO.
"Brigham has proven itself as a premier operator with a highly attractive position in the Williston Basin. We are a strong strategic fit, as both companies put a premium on technological innovation and advancement. We look forward to creating value and developing this position further together with our new colleagues," said CEO Helge Lund of Statoil.
Tight oil reservoirs are being developed with similar methods as shale gas and liquids with long lateral wells that are hydraulically fractured, and have similar production profiles. Commercial tight oil extraction is a relatively new activity and has increased significantly the last couple of years. The oil produced from the Bakken and Three Forks formations is a light crude quality. Oil production from Brigham's assets in Bakken has low CO2 emissions.
Brigham has demonstrated strong operational capabilities by adapting new technology in horizontal drilling and hydraulic fracture stimulations to develop the tight oil resources in the Williston Basin. Brigham has drilled 88 consecutive producing North Dakota wells, with an average early 24 hour peak production rate of approximately 2,800 boe per day. The company currently operates 12 rigs in the area and aims to drill approximately 140 wells per year.
"We are impressed by the performance and technological prowess demonstrated by the employees of Brigham and look forward to further responsible development of these world class assets. We will build on Brigham's good neighbor program and continue to engage with local authorities and communities in the Williston Basin area," said Bill Maloney, Executive Vice President for Statoil in North America.
Statoil will continue to build upon Brigham's operational capability, and will maintain the Austin location. Retention plans for employees are in place. Statoil will emphasize safety, efficiency and business continuity during the integration period.
Statoil is committed to leveraging its technological competence, project execution skills and financial capability to secure continued high operational performance and value creation. The Brigham transaction also provides Statoil with approximately 430 miles (690 kilometers) of oil, natural gas and water transportation systems centrally located in the Williston Basin. This will not only secure offtake, but it will also significantly limit the environmental footprint and allow Statoil to continue to implement industry leading HSE standards.
The cash tender offer is expected to commence within 10 business days and shareholders will have 20 business days following the day of commencement to tender their shares. The transaction is subject to the terms and conditions set forth in the merger agreement, including that at least a majority of the outstanding Brigham shares are tendered, that the waiting period under the U.S. antitrust laws has expired or been terminated, and other customary conditions. If the tender offer is completed, un-tendered shares will be converted into the right to receive the same USD 36.5 per share paid in the tender offer. Closing of the transaction is expected by the end of 1Q 2012.
Tudor, Pickering, Holt & Co. Securities, Inc. and Goldman, Sachs & Co. are acting as financial advisors to Statoil and Vinson & Elkins LLP is acting as legal advisor to Statoil on this transaction. Brigham Exploration Company has engaged Jefferies & Company, Inc. as its financial advisor in connection with this Offer. Its legal advisor is Thompson & Knight LLP.
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