As a result of this pre-emption, the Wandoo Oilfield will be excluded from the assets Arc has previously announced that it will acquire from WPP. Arc will proceed with the acquisition from WPP of WPP's interests in the BassGas and Cliff Head fields, together with associated exploration acreage,1 on the same terms as previously agreed and announced to the market ("Acquisition").
The revised total consideration for the Acquisition is US$189.6 million as at the effective date of 1 January 2007. The net amount payable by Arc on completion of the transaction is now expected to be approximately US$180.6 million.2 The Acquisition remains competitively priced, with the revised total consideration for the Acquisition price representing a 2P reserves value of US$14.93 per boe3. This compares favorably with recent transactions in the E&P sector, which have averaged US$17.95/boe4 on a 2P basis.
The Acquisition of BassGas and Cliff Head will substantially increase Arc's oil and gas production and reserves. Arc's net 2P reserves will increase by 190% from 6.7 to 19.4 million barrels of oil equivalent ("mmboe").5 Net FY2008 production is forecast to increase by 72% from 1.9 to 3.2 mmboe.
Mr Eric Streitberg, Managing Director of Arc, said:
"While we are disappointed not to be able to acquire the Wandoo Oilfield interest, the fact that Vermilion chose to exercise their pre-emptive right vindicates our assessment of the value of the asset. We applied the same rigor to our assessment of the Cliff Head and BassGas assets and are confident that we are acquiring a suite of high quality assets at an attractive price. The revised transaction is extremely positive for Arc shareholders and, importantly, gives the Company the flexibility and financial reserves to take advantage of other opportunities we identify."
As a consequence of the reduced size of the Acquisition consideration, Arc now proposes to fund the Acquisition via:
The Placement will be conducted by way of a bookbuild on Wednesday, 9 May 2007 and is expected to comprise two equal tranches:
In recognition of the fact that only institutional and sophisticated retail investors will be eligible to participate in the Placement, Arc is undertaking the SPP under which each Arc shareholder will be able to apply for up to A$5,000 worth of shares at an attractive price.
Further details of the EGM and SPP, including pricing and application forms, will be sent to shareholders shortly.
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