Harvest Energy to Acquire Grand Petroleum
Harvest Energy Trust and Grand Petroleum Inc. have entered into a pre-acquisition agreement (the "Agreement") pursuant to which a wholly owned subsidiary of Harvest has agreed to make an offer to acquire all of the common shares of Grand for cash consideration of $3.84 per share representing an aggregate consideration of approximately $110 million. Upon completion of the acquisition, Harvest will assume Grand's bank debt and working capital deficiency currently estimated to be approximately $35 million. Harvest plans to fund this acquisition from the undrawn portion of its existing credit facilities.
The board of directors of Grand (excluding a common director of Grand and Harvest who abstained from voting) has unanimously approved the proposed transaction and has concluded that the transaction is in the best interests of Grand and its shareholders and will recommend that its shareholders accept the offer. Haywood Securities Inc. is acting as exclusive financial advisor to Grand's special committee and board of directors and has provided the special committee and board of directors with a fairness opinion that, subject to review of final documentation, the consideration to be received by Grand's shareholders under the offer is fair, from a financial point of view. Officers and directors of Grand holding approximately 15% of the outstanding common shares of Grand (on a diluted basis) have entered into lock-up agreements with Harvest pursuant to which they have agreed to tender their Grand shares to the offer.
The Agreement contains a mutual break fee of $3.5 million which is payable under certain circumstances if the transaction is not completed. Under the terms of the Agreement, Harvest's obligation to take-up and pay for the shares is subject to a number of customary conditions, including the deposit of at least 66 2/3% of Grand's outstanding common shares (on a diluted basis) to the offer and the receipt of all required regulatory approvals. The Agreement also requires that Grand cease all solicitation discussions and negotiations with any other parties with respect to any take-over proposals and provides Harvest with the right to match should a superior take-over proposal be received by Grand. Harvest anticipates mailing the offer and takeover bid circular to Grand's shareholders on or about June 20, 2007 and the offer will expire approximately 35 days thereafter.
Grand's assets include a significant presence in southeast Saskatchewan, the Sylvan Lake/Markerville area and eastern Alberta which are adjacent to existing Harvest operations with complementary drilling opportunities. During the three months ended March 31, 2007, Grand's production averaged 3,409 barrels of oil equivalent per day (boe/d) comprised of 2,322 barrels (bbl) of oil and natural gas of 6,521 thousand cubic feet (mcf). An independent engineering report prepared by GLJ Petroleum Consultants Ltd. effective December 31, 2006 estimates Grand's proved reserves at 3.4 million boe comprised of 2.3 million bbl of oil & ngls and 6.4 billion cubic feet (bcf) of natural gas, with total proved and probable (P+P) reserves of 6.0 million boe comprised of 4.2 million bbl of oil and 11.0 bcf of natural gas. These reserve estimates have been prepared utilizing definitions as set out under National Instrument 51-101. Grand also has 65,000 acres (46,000 net acres) of undeveloped land with supporting seismic data providing attractive development opportunities.
Harvest's acquisition represents approximately $42,500 per flowing boe and $24 per boe of proved and probable reserves based on Grand's first quarter 2007 production and the December 31, 2006 reserves report, respectively. Subsequent to completion of the acquisition of Grand, Harvest will be updating its guidance by approximately 3,000 boe/d.
Harvest is one of Canada's largest energy royalty trusts offering unitholders exposure to an integrated structure with upstream and downstream operations. We are focused on identifying opportunities to create and deliver value to unitholders through monthly distributions and unit price appreciation. With an active acquisition program and the technical approach taken to maximizing our assets, we strive to grow cash flow per unit. Harvest is a sustainable trust with current production from our oil and gas business weighted approximately 70% to crude oil and liquids and 30% to natural gas, and complemented by our long-life refining and marketing business.
Grand is a Calgary-based junior oil and natural gas producer with a focused production base in west central Alberta, east central Alberta and southeast Saskatchewan. Grand has shown increases in production and reserves growth year-over-year since its inception as a private company in April 2003.
- Harvest Reaps Bulk of Grand Petroleum Shares (Aug 10)
- Harvest Extends Purchase Offer of Grand Petroleum (Jul 27)
- Harvest Energy to Acquire Grand Petroleum (Jun 11)
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